Cindy Ord/Getty Photos
The coronavirus pandemic is a disaster that is “worse than the Nice Melancholy,” however traders ought to take a “leap of religion” and put money into stocks that might profit from the reopening of the US financial system, Tom Lee mentioned in a CNBC interview on Friday.
Lee didn’t waver on his bullish name on stocks, however did say that within the brief time period, stocks are overbought and the market must digest its latest good points.
Whereas a spike in coronavirus circumstances in some states is a sound concern, Lee is constructive on the truth that particular person states can open safely, pointing to states like New York and New Jersey, amongst others.
Lee mentioned he expects a “binary response” within the markets if there’s a breakthrough in a COVID-19 vaccine and even treatment, and the stocks that stand to carry out the very best if that occurs are the “reopening stocks” like airways, casinos, and motels.
“One of the best-performing stocks after the dot-com crash had been the web names, as a result of those that survived had been structurally long-term winners,” Lee mentioned, in protection of why he’s bullish on the stocks.
Go to Enterprise Insider’s homepage for extra tales.
Tom Lee is just not wavering one bit on his bullish name on stocks regardless of the worldwide coronavirus disaster being “worse than the Nice Melancholy.”
In a CNBC interview on Friday, the strategist mentioned traders ought to take “a leap of religion” and put money into the “reopening” stocks that stand to profit from the US financial system opening again up.
Lee’s FundStrat ready an inventory of those “epicenter” stocks that traders ought to contemplate shopping for because the financial system slowly reopens. The “reopening” stocks embody airways, cruise traces, motels, and casinos, amongst others.
Learn extra: Jefferies says purchase these 14 low cost stocks which are financially robust and positioned for market-beating returns
“If these firms aren’t destroyed on each the fairness and credit score facet, particularly credit score, I feel they’re much more resilient than folks notice,” mentioned Lee. “In the event that they’re exhibiting sturdiness right here, these are literally actually enticing firms as a result of they survived the best stress check in over 100 years,” he continued.
“Those that survive are going to be unkillable,” Lee defined.
Lee identified that “the best-performing stocks after the dot-com crash had been the web names, as a result of those that survived had been structurally long-term winners,” in protection of why he’s bullish on the stocks.
Learn extra: The stock market’s concern gauge is sending a persistent warning that has a 30-year observe document of signaling meltdowns forward
Lee can also be bullish resulting from particular person states with the ability to safely open, pointing to New York and New Jersey as latest examples. Alternatively, surging coronavirus circumstances in states like Florida and Texas show that the reopening course of for states is a fragile course of.
Lee mentioned that it is sensible for stocks to chill off, provided that they’re overbought within the brief time period and consolidation is wholesome for markets. Moreover, Lee expects promoting into quarter-end as traders rebalance their portfolios following a robust quarter for stocks.
However so long as the markets proceed to carry their 200-day shifting common, that is “excellent news,” mentioned Lee. The financial system is resilient and we are able to nonetheless get a restoration “even when we’re sporting masks and social distancing,” Lee added.
Learn extra: From a late-night infomercial to a 1,040-unit empire worth $188 million, how Jacob Blackett perfected his real-estate-investing technique after dropping $70,000 on his first offers
Lee concluded the interview by observing that from the market’s perspective, any breakthrough within the growth of a vaccine or treatment for COVID-19 will assist “traders see an actual path to normalcy” and can profit the reopening commerce.
Lee pointed to $5 trillion in cash on the sidelines and bearish sentiment as all of the extra cause to remain bullish.
“The dearth of a vaccine has saved folks actually cautious, that is why there’s $5 trillion of cash on the sidelines, and AAII investor sentiment is the third worst damaging studying since this disaster began so individuals are as bearish immediately as they had been once we nostril dived to 2,200,” mentioned Lee.
Learn extra: A market-crash professional often called ‘Dr. Doom’ warns a 10-year despair is coming – and says traders are far too assured a couple of doable restoration