Expect March to be an up month for the stock market, says Fundstrat's Tom Lee
Speakers
Tom Lee — Fundstrat Global Advisors Head of Research
— Fundstrat co-founder
Summary
- Tom Lee predicts March will be a positive month for equities, countering the "sell in May" or bearish sentiment often associated with geopolitical tension.
- He argues that markets typically sell off during the "buildup" to conflict (referencing the Straits of Hormuz) but rally once the actual event/battle begins ("sell the rumor, buy the news" dynamic).
- A key contrarian insight: Lee believes an oil price spike might make the Federal Reserve dovish rather than hawkish, viewing it as a tax on the consumer that slows the economy rather than pure inflation to be fought with rates.
- He identifies Software and the "Mag-7" as significantly oversold (trading at previous April levels) and ripe for mean reversion.
- Fundamental activity on the Ethereum blockchain (tokenization) is cited as a long-term driver for price, despite current price action.
Trade Ideas
Tom Lee
Managing Partner and Head of Research, Fundstrat
"In the past markets kind of sell off into the build up. And then they tend to do better once the battle begins... I would expect actually March to be an up month for the stock market." Current market weakness is driven by fear of potential conflict (Straits of Hormuz). Once the uncertainty resolves (even if conflict starts), the risk premium drops, and the market rallies. LONG broad indices to capture the post-fear rally. Escalation into a broader "World War III" scenario which Lee admits would invalidate the thesis.
Tom Lee
Managing Partner and Head of Research, Fundstrat
"Oil is going to create a price shock... Oil companies obviously are going to reap some benefits." Geopolitical tension in the Middle East disrupts supply chains. While bad for the consumer, this directly increases margins and profitability for US-based oil producers and the commodity itself. LONG Energy producers and Oil futures proxies. Rapid de-escalation of geopolitical tension causing oil prices to plummet.
Tom Lee
Managing Partner and Head of Research, Fundstrat
"Software stocks broadly, the entire complex kind of has fallen back to where they were last April. To me, that's clearly an overreaction... start to see some of the groups that got hit hard mean revert, including the Mag-7." The market has aggressively punished high-growth tech and AI names recently. These valuations have reset to attractive levels, suggesting the selling is exhausted and a technical bounce is imminent. LONG Magnificent 7 (MAGS) and Software (IGV) for a mean-reversion trade. Continued sector rotation out of tech if inflation fears persist.
Tom Lee
Managing Partner and Head of Research, Fundstrat
"What's happening so much is being built on Ethereum now... If it's all taking place on Ethereum then price follows." Lee draws a parallel between economic activity (GDP) and asset prices. High developer activity and tokenization on the Ethereum network are fundamental drivers that will eventually force the price of the asset up, regardless of current "crypto winter" sentiment. LONG Ethereum (via ETHE trust/ETF) based on network utility. Regulatory crackdowns or capital continuing to favor hard assets like Gold over digital assets in the short term.
