Inflationary pressures are on a sustained path downward, says Fundstrat's Tom Lee

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01. let's bring in Tom Lee from funstrat Global advisors Tom I'd love to have you on you've got a bold perspective that you always bring um how how much higher can the s p go throughout the year now that we got this debt ceiling issue mostly taken care of what is the Catalyst to move up uh John I know it's uh it's a it's a key question because the stock market's up about 10 percent right at the midpoint and everyone's asking the exact same question you know is this a good time to put money to work can I make money in the next six months I think there are some reasons uh for stocks to actually Advance probably another 10 percent at least into year-end to get towards the old highs uh first I do think inflationary pressures even though it's a mixed picture are really in a sustained path downward um we're getting sort of like flukey data but you know this week the the used car data really pointed to inflation cooling you know that's a huge weight in the CPI right in Advanced Auto Parts suggested that as well right and Home Depot as well when you got you know the auto part prices and the lumber prices kind of hitting them in a way that's exactly right and even if this is not showing up in CPI yet all of the commentary from the CEOs and even the beige book support that picture of like future inflationary pressures are diminishing um now that's important because that means the FED doesn't have to hit the market as hard as it did last year I mean that's what made last year so tough but now we got to Fed that slightly less hawkish now they have to worry about Regional Banks so there's a temporary put there and then we have to layer in the fact that there's a lot of cash on the sidelines and I think a lot of guests today talked about that there is an enormous amount of cash that's un allocated part of it is the debt ceiling part of it was people waiting for the FED but we know as a percentage of market cap it's we're almost back to.com levels so that's the Nader but Tom why shouldn't I believe that the the optimism that you're expressing now about why the market could move 10 percent higher is the reason why the market uh is up uh 10 so far already and that cash on the sidelines cash does a lot more on the sidelines than it used to so why should we assume that the market deserves it that's great question John like you know how much is discounted just like last year was the 27 decline discounting a lot of the hiccups and earnings now um fundamental investors are going to start to become a little more constructed because when you look at earnings revisions they have bottomed not just tech only but rest of the market and when we look at things like technicals such as you know priced 20-day or price to 200 Day More stocks are beginning to participate so even though breath hasn't been great I think there's now a chance for investors to say there's a catch-up trade coming now that could come from the Autos or it could come from the financials or discretionary Industrials I can't tell you it's decisive yet but that's really why I think Fang has led they were the first to Peak first to bottom now really leading year to date up nearly 50 percent I think the second half is a story of a lot of other sectors catching a bid well is it Fang because remember that Ann and Fang stands for Netflix not Nvidia and Nvidia has just been an amazing mover this year I mean I don't even know how much I stopped counting really at 150 percent it's up in you know it's up a lot uh and the AI has been a big mover in general so is it the big stocks uh have continued to do well Apple Microsoft Etc but this AI trade has been crazy might that argue that there's enough enthusiasm in the market already and there might not be that much more yeah well it's a great question but you know keep in mind Nvidia wasn't even heavily shorted into their earnings print and they revised forecasts really by 30 percent and that's the stock move um AI is something the FED would like to see continue to actually expand because that contains inflationary pressures like you know if you think about the FED being hawkish and what they're worried about they're not really worried about AI growing because AI takes away inflation pressures I almost think that the FED doesn't mind that Fang stocks are rising I I think stocks like Netflix and even Amazon which have been sort of the tail end of the Fang are also the parts of the thing that could really start to power a bigger move in Tech and discretionary I mean I think they're starting to look like even Tesla like they're beginning to participate and again that would strengthen and add bread to the market