Tom Lee said on Monday that he expects the strong start of the stock market in April to continue throughout the month, as part of what he previously dubbed the “ripper face rally”.
The co-founder of Fundstrat Global Advisors presented his case in an interview on CNBC’s “Fast Money”, after a 1.4% gain from the S&P 500 on Monday, reaching a record close of 4,077.91.
“Institutions have raised almost $ 200 billion in cash since the beginning of the year, so they have become very cautious and are either shrinking or selling their holdings in technology and growth, but they are just beginning to nibble … epicenter [stocks]”said Lee, whose company considers these companies to have been among the hardest hit by the pandemic, but who stand to gain from the economic recovery.
“So I think there is a level of surprise coming up in April, because we already had a strong ending early on Wednesday of last week. It really is three days of strong rallies and history shows that this is really growing to be what it could potentially be S&P 4,200 before the end of the month, “said Lee.
The broad stock index reaching that level would represent about a 3% increase compared to Monday’s close.
In addition, Lee said that this would make the April rally “something that is really strong, but, more importantly, a big surprise for the institutions”.
As for what will happen after a so-called face-ripper recovery, Lee said there may be a period of unstable negotiations.
“I think that if S&P does recover strongly this month, at a time when institutions are sitting with so much money and skepticism in this market, we could see a great chase and that could mark the high of the year.” he said. “I would not say that this is our basic scenario, but yes, we would have to consolidate these gains.”