Stocks could enter a multi-year rally as hedge funds increase their exposure and traders begin to shift funds, according to Fundstrat Head of Research Tom Lee.
In a new CNBC interview, Lee he says Investors have been cautious during the tensions with Iran, but sentiment has been improving as global threats emerge.
“I think the investors were too cautious in preparing for war.” Most of the stocks used by the dealers were taking a hit, especially the software, and Mag-7 was falling. Investors saw the start of the war as a risk-taking time on the table, which was a stark contrast to what we had seen a year ago when investors were buying risky stocks.
Now I think that the danger of the tail has been removed from the battle. Hedge funds have been starting up and have been increasing risk, and we can confirm this by talking to our clients. I think now it’s the traders who are starting to withdraw money and buy stocks. “
Lee says improving earnings and the strength of the U.S. economy will continue to push global funds into line.
“I would still be overweight in the US. Because if you think about where innovation comes from, whether it is technology, health care or financial services or fintech, it is the US companies. There was an argument that the US P/E should break down, but the war revealed that several of the US should rise.
I think this year is going to be a tough year because we have a new Fed chair coming in, but once we get through it, the next 18 to 24 months could be the best we’ve ever seen.
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