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Tom Lee says today's stock market rally is just the beginning. And that better days are ahead. You will hear Tom Lee in this video. First, the most important thing, but then I want to share my thoughts, my views on what may await this market even tomorrow. There could be big news. I'll also tell you what I'm doing with my portfolio right now, but first listen to what Tom Lee said.
And that brings us to the main question at the beginning of this hour. Is this the beginning of a new era for AI trading ? Well, your first guest thinks this is the start of at least a stunning rally at the end of the month. We'll invite Fundstrat's head of research, Tom Lee, who is also a CNBC writer.
Today is definitely an amazing day. And not just for stocks, but also for cryptocurrency. We'll get to that in a minute. Was there some catalyst I missed? What, what happened? You know, Brian, I think last week was the peak of pain, the peak of pressure, because the Fed was raising rates very aggressively.
We had high oil prices and high interest rates. And as you know, over the last few days and weekends, oil has cooled and rates have stabilized. And now we have a maximally aggressive Fed that can change course. So I think all the ingredients are there for tremendous growth, especially considering how oversold we were .
Either, or, or, and I say this as an energy expert, I understand this. But how important is the fall in oil prices? Because it reduces bond yields. Bond yields followed oil. So, oil is getting cheaper, bond yields are falling, and stocks are rising. Is this, is this some kind of formula ? Yes, it is, because if you look at the components of the CPI that are still overvalued, like airfares and transportation services, they are all energy-related.
And you know , the JP Morgan report last week that they do n't even have a baseline for oil, just told everyone that oil is expensive and you have to accept that, and I think that was the peak pain point as well. Do you also consider diesel fuel? Because when you look at the price of diesel, it was a shock to me, even when I was filling up with unleaded gasoline, to look and see that the price of diesel is higher, I think it was 680, when I saw it, 681.
Mm. This is shocking, and I hear from people in completely different industries, including the gambling industry, that they are worried about future construction costs due to the indirect impact of diesel fuel costs. Yes, and diesel, as you know, is widely used as an industrial fuel. So, yes, it is indeed a problem, and if there is a shortage, there is no substitute for diesel.
So I think there are good reasons why people should care about energy. Yes, but today they are not worried. Today, AI stock trading is in full swing again, and a little later on the air, we will be joined by Steven Baird from Morgan Stanley . Let's go live. That would be something. You know what? Stephen Bird, listen, let's add another voice to this great market discussion.
Jay Woods of Freedom Capital Markets, also a CNBC contributor, will join us right now. Jay Woods, thank you very much for joining us. I know that deep down you are a technical analyst. You love graphics. So was there some trigger today, a catalyst that came out of nowhere? Yes, there was, and this is technology.
I just wrote an article this weekend calling the market the "ultimate provocation" in the confrontation between the "bulls" and the "bears." Level 7600: Last week after the Fed decision, we fell, then rebounded, and now we are breaking through it upwards. So, it's worth looking at the market leaders, as Tom said: "The Magnificent 7" are making new highs.
Then pay attention to the stocks that can lead us to a crazy rally. They are in our game. Now let me cool down a bit about this "crazy rally ". The energy sector fell for one day, but nothing changed. Regarding your question, what has changed today? Nothing. We are risk-averse. There is hope that the Trump-Xi meeting will be successful.
There's almost nothing in the reports this week , except for Cracker Barrel and General Mills. Costco is interesting, but the real test of strength awaits us next week when Micron reports. Micron is a stock, one of the top ten in the world, that has the potential to grow by another 10%. I think this, along with the growth in the semiconductor and software sectors today, will help us get back to the old high around 7800 on the S&P 500, but I don't think the technology sector alone will be enough to break records and start this crazy rally.
It's a good rally, don't get me wrong, but not enough that we should completely, you know , rely on this market on the eve of the midterm elections. Yeah, I mean, I agree with you. I think there is potential for growth here. I guess where I disagree is that the sentiment is still quite pessimistic. You know, last week AAII had a majority of " bears," you know, that's actually the bottom of sentiment.
And I know that our clients have reduced their risks. There have been a lot of risk-reduction measures because they don't want to buy stocks when the Fed raises rates. So I think people are not ready. I believe this could push the S&P above 8,000 by the end of the month. But AMD has reached a market capitalization of $1 trillion today.
Meta is up 25% this month, Intel is up 35%, and last time I checked, it was up 11% today . So what gives you confidence that there is still room to grow here? Well, I mean, these are examples of companies that people have written off since the end of June, saying, "Hey, these are big players that are losing out on AI bidding." And then look how explosively they grew.
There are still a lot of companies that need to catch up, and, you know, AI stocks are still below their June highs. So not only do I think the leadership will come from there, but also, as you know, crypto moves typically lead the S&P by about a month, and crypto made a pretty big jump in August, and I think that's why we're seeing stocks rally in September.
So, just to be on the same page, Tom Lee was referring to the AAII investor sentiment survey. Last week, the bearish sentiment indicator was 53.3%. This is the annual maximum of pessimism. That is, it is higher than during market corrections. This was an abnormally high level of pessimism. Only 17.9% of investors were neutral, compared to a historical average of 31%, and only 28.8% were bullish, compared to a historical average of 37.5%, and again, the historical average for bears is 31.5%, and now they are 53.3%.
So you are pretty exhausted. From a sentimental perspective, this is true. You can also take a look at CNN's Fear and Greed Index. It is at 34. So if you divide fear in half, the midpoint of fear is 35. You are at level 34. You are even below the average mark after today's increase. So, at the close on Friday, you were at 29, which was almost a state of extreme fear.
Market momentum in a state of fear. Look at this. Stock price strength, extreme fear. This makes the April correction look like a joke. Based on this alone , as well as the dynamics of stock prices, which are in a state of extreme fear, one might think that we are currently in a deep correction. So, investors were really caught off guard today.
And I think part of it is because of the pursuit of profit. Um, and we'll talk about that in a moment. Put and call options in a state of fear. Market volatility is at neutral level. Demand for safe assets is in the greed zone, and demand for junk bonds is at a neutral level. What's actually really interesting about what we're seeing today is that the VIX is feeling normal, right?
The VIX index didn't really show anything special . If you look at the VIX here, we'll use this chart. Today he has grown a little. I mean, it's up about 1.5% during the day. It fell at the end of the day, but look at the past month. It is now almost at its monthly lows. So, while everyone has become very pessimistic , the VIX does not confirm this.
Oddly enough. And again, I think Tom Lee is right. Last week, JP Morgan said, " Look, we don't have a target price for oil anymore because we can't model the finale, you know?" Wall Street is trying to model what the end of the war with Iran and, in fact, the rate hike that is a consequence of high oil prices will look like.
And they say, "Dude, we don't know what this is going to look like." We don't know if a deal can be done next week, next month, or next year. And what happens in the war with Iran will actually hold the keys to what happens in the market. Because you are pricing in the fact that you are currently in a rate hike cycle.
Oil fell about 4% today. Today, the yield on 10- year Treasury bonds fell by about 4.5 basis points. If we look at April 28, 2027, you're pricing in one, two, three additional rate hikes, with a probability of a fourth hike at 20.3%. So you're pricing in four to five rate increases, including what we just got, over about seven to eight months.
This will put pressure on trading returns, you know, this 25% annualized earnings growth — after four or five rate hikes, earnings growth next year is not going to look nearly as strong . And I think some people have exited the markets to some extent because of the rate hike. I think Tom Lee is right here.
Again, the positioning is very low right now. But what happens next is more important. What will happen tomorrow? What will happen next week, next month, in 3 months. And now here's what's interesting. Historically, in a midterm election year, the stock market bottoms on September 30th . This is the average since 1930.
So sometimes it bottoms out earlier, sometimes later, and sometimes exactly on September 30th, right? But it usually reaches its minimum right now. So I'm not too surprised that the stock is up today. But you usually see a real “ face-tearing rally,” if I may borrow that phrase from Tom Lee, right before a midterm election.
And after the midterm elections, the real madness begins. And listen, we won't have this crazy rally unless the war with Iran ends. Will it end? Perhaps. Maybe not. This is the hardest part at the moment. Because listen, it's very simple, okay? Why did the markets go up today? There are actually five different reasons that are at the heart of it all, okay?
It all comes down to oil and Treasuries, which are now interconnected. So , when oil prices drop, bond yields fall and stocks rise, right? When oil prices rise, bond yields rise and stocks fall. This has been the correlation over the past few months. So , it was the fall in oil and bond prices and optimism about Iran that fueled the rally in the markets today.
First, no Iranian strikes over the weekend. And that looks unlikely this week. So, purely from a catalyst perspective, tomorrow we have the UN General Assembly, on the sidelines of which Trump could meet with the president of Iran, and perhaps there will be signs of a deal or something like that. This is part of this process.
But thanks to tomorrow's UN General Assembly, and then Trump's meeting with the Chinese leader on Thursday, you're unlikely to see any escalating strikes on Iran this week. So people say, "Yeah, it's a pretty good bet that oil will go down this week." You have already factored much of this into today's prices.
Although I'll tell you this. Second , Trump refused to strike the Houthis this weekend. So Trump's restraint is perceived positively. Maybe something good will come of this . It was reported that Saudi Arabia redirected more oil than expected. This is good . Will this save the oil market? No. Over the past 6 months, 1 billion barrels of oil have passed through the Strait of Hormuz .
That's about 16 million per day. This was news over the weekend that markets seem to have taken positively. This is not new information. The Secretary of Energy told us that 16-18 million barrels a day pass through the Strait of Hormuz, but we heard that from CENTCOM, and today it was perceived a little differently, as they say, you know?
Point five, Trump will likely meet with the president of Iran at the UN General Assembly. So there is some optimism that perhaps a deal between the US and Iran is on the way. And look, I do n't want to prejudge what might happen tomorrow at the UN General Assembly, but given the news we have today , even with the positioning in the markets, the Nasdaq up almost 3% today tells me that maybe someone knows something, right?
Maybe good news will come soon . Because, again , as Brian said, of course, some good things have happened, I think, from an oil perspective: Trump is showing restraint and will likely meet with the president of Iran on the sidelines of the General Assembly. You know, Saudi Arabia, a little more oil is coming from the Middle East.
It looks like there will be no strikes this week, but does that explain the 4-5% drop in oil and the 3 % rise in the Nasdaq when you were already close to peak values? Not quite. So, here's the bad news. If there is no good news tomorrow, stocks will probably fall. Right? After a 3% move in the Nasdaq, either we have bigger news coming, like a ceasefire with Iran, the opening of the Strait of Hormuz, or something like that, or we just got ahead of ourselves for no reason.
And if nothing happens, the stock will go down. Today was a great day for our trading portfolio. We grew by more than 4%. This brings our year-to-date profit to 103.22%. This is not with options, this is not a trading portfolio. This is a portfolio of stocks that I buy and hold with a 1 to 3 year horizon for asymmetric growth opportunities, righ for today's episode.
But, despite everything, this year I am significantly in the black. And we are in a very precarious situation, because I truly believe that if the war with Iran doesn't end, the markets will eventually collapse because of it. But will it happen next week, next month, or in 3 months? That's really a bigger question, right?
If the war with Iran ends, the markets will go up rapidly. Today was just a hint of what the rally would look like if the war with Iran ended. This will be explosive growth. Let 's take a quick look at that before we, you know, talk more about the margin in the portfolio. The proportion of stocks trading above their 200-day moving average is 52%.
You are effectively back to the April correction lows. The proportion of stocks trading above their 50-day moving average is 31%. A month ago you were at 75%. You have dropped more than 50% in a month. You are back to your April lows. Of course? Or pretty close to April lows. Yes, the mood is depressed, but for pretty good reasons, right?
Oil at $100 a barrel, diesel running out, fears about AI trading, IPOs being postponed, and Anthropic and OpenAI with their open-source models are encroaching on their breakfast, lunch, and dinner. You know, there are good reasons why people exit the markets. There is some optimism about tomorrow's UN General Assembly meeting, but if the war with Iran doesn't end, or the situation worsens , or nothing happens at all, stocks will fall even lower.
So, in my brokerage account , in the Trading Community portfolio , this is a public portfolio, the one tracked in the Trading Community, which you can join, link in the description to today's episode. Again, I am not a financial advisor, not a financial planner, . Don't be silly, okay? I have $25,000 in margin here.
This is approximately 10% of the portfolio. There is no margin call risk unless an asteroid hits the United States, in which case you will be in much bigger trouble if this portfolio gets margin called. I'll tell you this, okay? You better have a bunker, you better have, you know, some protection and hopefully some food and seeds to spare, right?
If this portfolio ever got a margin call, you know ? Well, to dramatize. So, I am fully prepared for growth. If the war with Iran ends and this is the start of a bigger rally, great. Fully prepared to participate. If the markets eventually crash, in a week, in a month , it doesn't matter, there's 353,000 in marginal purchasing power here , plus external funds that I could contribute to the portfolio.
So in any case, right now this portfolio is set to win: whether we fall or we rise, it doesn't really matter. And I think that's how you want to position yourself in portfolios now. Again, this is not a recommendation, not financial advice, I'm not a financial advisor, but to me it feels like a coin toss: flip a coin, pick a side, the market will crash, the market will rise, literally no one knows.
Again, I think you should have your buy list ready to go, just in case the markets do go down. This is a very smart approach to things, but I'm in no rush to buy stocks right now. If opportunities arise, I will invest huge amounts of money in them . But this is not an environment where you want to be very heavily credited, right?
I don't know if we'll get to 8200 for the S&P like Tom Lee says. I don't think we'll get there until the war with Iran is over. This is Well, I'm looking at the Nasdaq here. Sorry. But the same goes for the S&P. I don't think that will happen until the war with Iran is over. Not for anything in the world.
So, that's a 6% move up from here. Something needs to fundamentally improve. We need rates to fall, oil to fall, we need fewer rate hikes to be built into the markets. If the war with Iran ended tomorrow, damn, I wouldn't bet against 8,500 for the S&P. But will I predict such a rally until something positive happens?
No. And then again, maybe the market already knows that good news is coming. For example, today's catalyst, what happened, does not explain the Nasdaq's 3% move up. Perhaps market makers know that something good will be announced at the UN General Assembly. I do n't know. But it's worth keeping an eye on. So, having said that , ladies and gentlemen, let me .
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