The markets could rally 'very strongly' if the Fed holds rates in September: Fundstrat's Tom Lee
Speakers
Tom Lee
— Managing Partner & Head of Research, Fundstrat
Summary
Fundstrat's Tom Lee discusses why the S&P 500 could rally strongly if the Fed holds rates in September, then outlines a potential October pullback with S&P lows around 7,300-7,400. He also argues crypto's fourth-quarter setup is strengthening, with Bitcoin and Ethereum likely to have a huge Q4 and Bitcoin potentially reaching six figures. He highlights institutional buying of crypto stocks, stronger earnings revisions for the S&P 500, and sees structural GDP growth above 3%.
- Tom Lee sees the September Fed meeting as a pivot; no hike and no cut could trigger a strong market rally.
- Weak jobs or CPI data would discourage the market from pricing a Fed hike.
- A correction may be delayed to October, with S&P 500 lows around 7,300-7,400.
- Crypto catalysts include institutional allocation, the four-year cycle ending, Korean investors rotating back, and possible Clarity Act passage.
- Bitcoin could reach six figures, and $150,000 remains possible.
- Institutional investors are buying crypto stocks as a bet on a big fourth quarter.
- S&P 500 year-end upside is supported by earnings revisions; 8,200 is seen as a low number.
- Structural GDP growth is seen above 3% on the investment cycle, onshoring, and energy infrastructure.
Ideas
Fed holding rates may spark strong rally.
Tom Lee's base case is the Fed will neither cut nor hike at the September meeting. With mounting concern, weak seasonality, and a market that will not price a hike if jobs and CPI are soft, a Fed hold could be the pivot point and markets could rally very strongly.
Crypto set for strong fourth quarter.
Crypto fundamentals are improving into year-end because crypto is the best-performing macro asset in Q3, institutions are expected to allocate in September and Q4, the crypto four-year cycle ends next month, Korean investors are rotating back from AI to crypto, and if the Clarity Act passes, Bitcoin and Ethereum could have a huge fourth quarter.
