Inflationary pressures may have caused the recent market selloff, but Fundstrat’s Tom Lee thinks stocks could still end the year higher. The firm’s head of research believes investors may be placing too much weight on recent economic data showing that inflation is higher than economists expected. “The story got muddled because the CPI report was a disappointment, but it was driven by so-called stubborn elements,” he said on CNBC’s “Closing Bell” Friday afternoon. “Inflation is normalizing, but that’s not clear from the big picture.” Even if the Fed ends up cutting interest rates this year, Lee thinks stocks could still benefit. In fact, Lee said he thinks the S&P 500 index could end the year at 5,700 or “possibly higher.” He said it still “makes sense to own things that work,” so Lee is against mega-cap stocks that could continue to be bought on the back of prospects for artificial intelligence and weight loss drug Ozempic. He maintains a bullish stance. But he also likes small-cap stocks ahead of rate cuts, and he thinks industrial stocks are attractive as ISM manufacturing data turns higher.
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