Tom Lee mentioned Monday he expects the inventory market’s sturdy begin to April to proceed all through the month as a part of what he is beforehand dubbed a “face-ripper rally.”
“Establishments raised nearly $200 billion of money for the reason that begin of the 12 months, in order that they’ve turned fairly cautious, and so they’ve been fading or promoting their tech and progress holdings however they’ve solely simply begun to nibble on the … epicenter [stocks],” mentioned Lee, whose agency considers these to be corporations that had been among the many hardest-hit within the pandemic however stand to realize from the financial restoration.
“So, I feel there is a stage of shock coming in April as a result of we already had a powerful end starting Wednesday of final week. It is actually three days of sturdy rallies and historical past reveals that is actually constructing as much as be what might be a, probably, S&P 4,200 earlier than the tip of the month,” Lee mentioned.
The broad fairness index reaching that stage would signify roughly 3% upside from Monday’s shut.
Moreover, Lee mentioned it might make the April rally “one thing that’s each actually sturdy however, extra importantly, fairly a giant shock for establishments.”
As for what occurs after a so-called face-ripper rally, Lee mentioned there might be a interval of uneven buying and selling.
“I feel if the S&P does in reality rally strongly this month at a time when establishments are sitting on a lot money and there is a lot skepticism on this market, we may see a giant chase and that might mark the excessive for the 12 months,” he mentioned. “I would not say that is our base case, however sure, we must consolidate these good points.”