“The only cats worth anything are the cats that take chances.” ~ Thelonious Monk

Good evening,

For Head of Research Tom Lee and his team, the markets, year-to-date, are behaving essentially as he forecast back in December. Lee noted in mid-December that there was not a single instance where the S&P 500 fell 20% and got within 1% of an all-time high without subsequently making a new high in 20 days or sooner. This helped drive his call for “new highs in January,” which we saw last Friday (January 19).

Markets continued to climb this week. The DJIA set a new record on Monday, following in the footsteps of the S&P 500, which closed slightly down after a six-day winning streak.

After last week’s milestone, Lee asked his team to look back at what has happened in the past when stocks made an all-time high after having fallen 20% or more beforehand. They found that of the 11 precedent instances, “all 11 times, equities were higher six months later, with a median gain of 8%.” For seven of those 11 times, stocks had made strong gains 18 months later.

Other elements of Lee’s base case for 2024 continue to hold. This week, we saw the S&P Global Manufacturing PMI climb back to 50.3. As Head of Data Science Ken Xuan noted in our weekly huddle, “Be...

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