Good evening:

"Markets trend only about 15% of the time; the rest of the time they move sideways" - Paul Tudor Jones

In recent weeks, Tom Lee has noted that many clients are puzzled by the scorching market rally to kick off 2023. As inflation continues to fall, the Nasdaq posted its best start in 31 years. Rarely have markets been this resilient. Rarely has there been this much cash still on the sidelines. 

“People might say, ‘Well, earnings still need to fall,’” Lee said Thursday. “Yet (the S&P 500 Index) is producing its fifth-best gain ever through day 26 … And so, we have a table here to show that if you look, through day 26, at all instances where the market went up more than five percent, the median further gain into the end of the year is 16%, and only one of the 17 instances did the market actually decline, which is 1987. So, unless you think this is 1987, the S&P is on track to end the year above 4,800.”

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Lee’s research aligns with that of Mark Newton, our Head of Technical Strategy, who has relied partly on seasonal trends and cycles to forecast major market moves. Since the fall, we’ve shared the power of understanding the presidential cycle and its impact on markets. Last year was the 21st midterm election year since 1939...

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