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All right, let's talk about something really interesting happening in the markets right now. We're going to dive into a conversation with Tom Lee, who's a big name in market strategy and leads research at Fundstrat. He just made a pretty exciting prediction. The market is starting to look like it's hit a point where we can expect it to bounce back.
If you're wondering what that means for your investments, you're in the right place. We'll break it down so it's easy to understand. I'm going to play a clip for you and later I'll tell you about a stock you might want to consider for 2025. We'll look at the company's latest numbers and what they mean for you.
This could be a really big deal, so stick around. Before we get started, please hit that like button, share this with your friends, and subscribe. It really helps the channel grow. Our next guest says the Fed put is alive and well, and that's one of four positive signs he's seeing for the markets this week.
Joining us is Fund Strat's head of research, Tom Lee, also a CNBC contributor. Tom, it's good to have you, and let's just kind of start with that theme and maybe you can build on what Steve just told us. How do you interpret the Fed's move yesterday? Welcome. Well, I think markets were positively surprised by the Fed's move um in part because recent staff papers from the Fed had argued tariffs would actually be multi-year inflationary effects.
So, Fed Chair Powell's comments yesterday, I think, did catch a lot of folks by surprise just because uh it is a view that markets probably wanted to hear that that they'd like to hear that the Fed is viewing tariffs as possibly transitory because that puts them in a position to actually intervene if labor markets start to weaken.
And in fact, that's evident in the SEP because 90% of Fed staffers now see not only risk to growth, the GDP growth forecast, but it was 90% seeing it as downside risk. Steve, would you agree with that characterization or or how do you think the Fed or Goulsby or a member like that might respond to the idea that they're still at the ready to support the economy?
They're at the ready to support the economy through keeping rates um uh where they are right now. he kind of took off the table or never has put on the table this idea of hiking rates. I think it's a difficult and very interesting dance the Fed has to do here. I I think there's an argument and people I've talked to have have supported this of the Fed talking tough right now about inflation to make sure and play a role in the idea that uh the tariffs do not become a broader inflationary uh have a broader inflationary effect but then being ready as needed to address the downside.
Uh right now it seems like because Powell feels like he's restrictive enough to deal with that inflation problem that the all the talk or the or the leaning here is addressing the potential negative effects of the tariffs and the idea that they both brought down their uh um uh growth forecast while they raised the inflation forecast.
If this were the Vulker Fed or the Vulker idea, Kelly, you would say you would say that uh uh Paul Vulker would be addressing the inflation problem and then get to the uh the growth problem. One of the most important things Tom Lee talked about is that the Fed put is still in play. What does that mean?
Basically, it means the Federal Reserve is ready to jump in and support the markets if things start to get shaky. This is great news for investors because it shows the Fed is keeping a close eye on the economy and will take action if needed. Interestingly, Fundstrat is known for its detailed analysis of market psychology alongside its financial research, which gives them a unique perspective on investor behavior.
The Fed recently surprised people by suggesting that tariffs might not cause long-term inflation. This is huge because it means they might not need to raise interest rates as much as we thought. If the Fed sees inflation as temporary, they can keep rates steady or lower them if the economy slows. This benefits stocks, especially if inflation worries fade.
Tom mentioned 90% of the Fed's staff see risks to growth. This means the Fed is ready to support the economy if it slows down, which is a good sign for the stock market. Why does Tom Lee think the market could bounce back? Let's look at it. First, the Fed's position. If inflation isn't as stubborn as we thought, rate cuts could happen sooner.
Lower rates mean more money flowing into the market and higher stock prices. Also, when investors are really negative and the market drops a lot, it often leads to a quick recovery. If we're near the bottom, it could be a great time to buy. All right, what should you take away from this? Here are a few key points.
First, stay invested. If Tom Lee is right, the worst might be over, and selling now could mean missing out on a big rally. Second, look for good opportunities. Stocks that have dropped recently could be ready for a big comeback. Some of these stocks have a lot of potential, and I'll tell you about one that could really take off.
Finally, if this is really a bottom, traders might find some great chances in the coming weeks. Just yesterday, Fed Chair Jerome Powell said something that surprised many people. The market was worried that tariffs and other economic problems could cause lasting inflation. However, Powell's comments suggested these problems might be temporary.
That's big because it means the Fed sees room to step in if the economy slows down. Tom Lee is seeing some really positive signs that we could be at a bottom. And if you're feeling nervous about the market, this might give you some confidence. First, there's a lot of cash sitting on the sidelines. Tom Lee points out that many big investors are holding a lot of cash which he calls dry powder.
Why is this important? Because that money eventually needs to go back into the market and when it does stocks tend to rise. Second, investors are really negative. Lee mentioned surveys that show sentiment is as bad as during a recession, but the market's movements don't justify this extreme negativity.
Historically, when sentiment is this bad, it often leads to a strong rally because expectations are so low that even a little good news can make stocks jump. Now, let's talk about a big potential factor, tariffs and trade talks. April 2nd is a date to watch. Reports suggest that the White House is working to reduce some tariffs and there are lastminute trade negotiations happening.
Lee mentioned a recent tweet about late night trade deal discussions which many people missed. If the market isn't expecting good news on trade, there's a lot of potential for stocks to rise if good news comes out. So, to sum it up, lots of cash on the sidelines, really negative sentiment, and potential good news on tariffs.
These are the perfect conditions for a market recovery. and Tom Lee thinks the signs are lining up. Now, let's talk about a stock that's dropped but has a lot of potential. Advanced micro devices, ticker symbol AMD. AMD has been part of the AI boom, but recent market trends have pushed the stock down.
After hitting its peak in early 2024, AMD has dropped significantly, now trading almost 50% below its high. However, this drop could be a great opportunity for investors. Some top Wall Street analysts are very optimistic about AMD's potential. Hans Mosman from Rosenblat Securities has set a price target of $225, which is more than double its current price near $100.
That's a potential upside of 125% in the next 12 months. That would be amazing for investors, but is it realistic? AMD has always been a leader in semiconductor innovation, providing cuttingedge technology. While they've faced competition from companies like Intel and Nvidia, AMD's position is stronger than ever.
With advancements in AI, data centers, and custom chips, the company is set to benefit from the next wave of tech growth. Could AMD be the most undervalued AI stock right now? With upcoming growth, this stock could be a gamecher for investors who get in at the right time. AMD has seen some recent ups and downs, but looking at its financial numbers shows a company doing very well.
Despite a drop from its all-time high, AMD's numbers suggest it's a good investment. AMD's latest yearly results show strong growth in key areas. Revenue increased to 25.785 billion, a 14% increase from the previous year. Gross profit rose 22% to 12.725 billion with gross margins improving to 49%. Operating income jumped 374% to $ 1.9 billion, showing improved efficiency.
Net income nearly doubled, reaching 1.641 billion, a 92% increase. Diluted EPS climbed 89% from $0.53 to $1, showing stronger profitability. What this means for investors, AMD is growing quickly while improving its profit margins, which shows it's gaining strength. Despite competition in the AI sector, AMD's ability to increase revenue and boost profitability, suggests it's not just surviving, but thriving.
Wall Street analysts are still positive with targets reaching $225 per share, a 125% potential upside from current levels. Given AMD's strong financials and AI growth potential, this drop could be a great chance for long-term investors. Could AMD be the most undervalued AI stock right now? The numbers suggest it might be.
Tom Lee believes the market is showing signs of a big turnaround. And if he's right, now could be a good time to invest for potential gains.
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