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Inflationary pressures may have induced the recent market selloff, but Fundstrat’s Tom Lee believes that equities could still end the year higher. The firm’s head of research believes that investors may be putting too much weight into the recent economic data releases showing inflation above economists’ expectations. “The narrative got muddled because that CPI report was a disappointment. But it was driven by what we’d call stubborn components,” he said on CNBC’s ” Closing Bell ” on Friday afternoon. “Inflation is normalizing, it’s just not evident in the total picture.” Lee believes that even if the Federal Reserve only ends up cutting rates once this year, that could still be conducive for stocks. In fact, Lee believes that the S & P 500 could end the year at 5,700 or “maybe even higher,” he said. It still “makes sense to own what’s working,” he said, so Lee remains bullish on megacap names that could continue to be bought on the strength of the outlook for artificial intelligence and the Ozempic weight loss drug. But he also likes small-cap names ahead of interest rate cuts and finds industrial stocks attractive as the ISM manufacturing report turns higher.
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