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Tom Lee: The market is putting the Fed into a position to be more measured - YouTube
Channel: CNBC Television
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let's get right to our talk with the
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tape today that is today's rally why
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stocks had such a strong session and
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what that might mean for where they
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could go from here a ton of big earnings
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are coming next week we'll set you up
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for that too let's ask fun strats tom
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lee he's with me here at post night it's
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good to see you on a big day for stocks
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what was today about why did we rally
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was was it about a good retail number
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but not too good
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yeah i think there's a couple things one
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is the retail number because it shows
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that the economy is slowing but not
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broken
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i also think this umich survey was a big
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deal because it's corroborating that not
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only is gasoline down and the
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commodities down but now consumer
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expectations of inflation have rolled
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over
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market expectations of inflation have
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been anchored
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i think this pushes the fed to be more
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measured and we heard some of that
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comment yesterday and finally i i think
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it's good news that stocks aren't
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getting obliterated every time we have a
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bad cpi print
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make the argument from me if you would
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tom that this is not
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a sell the rip market that i shouldn't
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if i
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have some positions that i still want to
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get out of that i shouldn't take
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advantage of a day like this and do just
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that
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i think the majority of people want to
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sell this rip
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the reason i would say it's different is
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unlike every pretext for the past few
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months where commodity prices were
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soaring and consumer inflation
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expectations were soaring and
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market-based inflation expect
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interest rates are rising and even fed
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funds hikes were rising
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a lot of these are stabilizing and
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rolling over
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which means this is putting the fed in a
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position to go from being expeditious
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you know chasing hikes to be more
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measured that's a huge deal for markets
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because now it gives markets a path to
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sort of see where rates will be
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and keep in mind in 1882 the stock
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market bottomed more than three months
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before volcker sort of abandoned his
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vulcar moment policy so i think that's
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why stocks are in a different place now
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than they were a month ago and i
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actually think that's why second half
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could be quite strong but even your own
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technician mark newton was suggesting
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just days ago literally
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that
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a new low was coming and maybe the
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second half was going to be good but not
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until you hit a new low in stocks you
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sound like you're telling a little bit
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of a different story here uh yes and you
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know one thing that mark and mark's been
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very consistent about expecting a low a
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lower low into the end of this month
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into july is that that's going to be a
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touch that he thinks that we might
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momentarily peak below the prior lows
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but he's buying that because it's not
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the start of a new downtrend and i mean
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to me that's the message i i don't think
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we're talking about accelerating
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downside i mean we've had earnings
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misses and companies aren't falling
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i think that
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that the upside risk is much greater now
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than the downside but do you do you
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agree with him that we're going to put a
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new low in you you painted a picture at
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the beginning of our interview here that
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suggested otherwise uh
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you know i'm not great short term so if
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mark that's mark's belief i would defer
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to him but do i think stocks have a a
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lot of negative shock still in it it
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would have to be the belief that the fed
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suddenly feels urgency to go much faster
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that doesn't seem to be priced into
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fixed income at all so i i'm in the camp
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that
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stocks have bottomed what about this
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idea of 100 basis points right it was
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sort of bostick kind of got everybody
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all worked up even though he's not a
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voting member with his everything is on
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the table commentary from a day or so
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ago waller came out and talked everybody
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off a cliff however sock gen rbc city
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nomura piper sandler everybody's talking
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about 100 now yeah
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i think what's interesting is there's
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talk about 100 but it's not raising the
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terminal rate so people are just talking
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about putting more under 25 into july
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but it's not raising where the fed sort
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of peaks and i think that's more
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important if if the terminal rate isn't
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rising
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then 100 or 75 isn't really changing
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what it means for equity prices
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but the cpi was bad
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and the suggestion was from people like
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steve leesman for example
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that you need to reset the clock last
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cpi was bad
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this cpi was bad at a time where we had
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hoped for some moderation if that does
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anything
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it forces you to reset the clock about
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when the fed may be a little easier than
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they are now so what happens to your
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thesis about a strong second half if
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they have to go stronger in september
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because inflation is still red-hot yeah
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i steve makes a great point because the
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fed needs to see consistent
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uh a consistent and meaningful move down
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in inflation
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but we also have to remember cpi is the
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last thing to capture that because
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commodities are already rolling oil is
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back to pre-invasion levels
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i mean wheat and copper are lower
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the markets based inflation expectations
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are actually lower than they were any
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time that they started this year
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and now consumer confidence
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inflation expectations are rolling over
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these consumers are already experiencing
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the rent and the things that are making
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cpi hot yet their inflation expectations
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are coming down so i would say if you
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see all the soft data pointing to a
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downturn
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the fed doesn't have to wait for cpi to
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get to two or three before they realize
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momentum has already shifted inflation
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so i i would say i
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i'm in the camp that
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the fed has more room because the
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market's done so much work for them
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