Wall Street’s top bull highlighted two big risks that could upend the stock market in 2024.
Fundstrat’s Tom Lee said a hard landing in the economy and a parabolic melt-up in the stock market are risks to watch.
“If we have a parabolic move in December and we end up at S&P 5000 by December 31, you’ve pulled forward a lot of the gains for 2024,” Lee said.
One of Wall Street’s biggest bulls highlighted the two big risks that could derail the stock market next year.
Fundstrat’s Tom Lee, who has one of the highest S&P 500 price target for 2024 at 5,200, told CNBC on Thursday that a hard landing in the economy and frothy trading action could lead to a volatile stock market next year.
Lee said that he expects the US economy to continue to grow in 2024, with PMI’s likely to turn higher in part because of the Federal Reserve signaling that it will shift from hawkish interest rate hikes to dovish interest rate cuts in 2024.
But a hard landing in the economy could still materialize if other countries don’t rebound from their current economic slump.
“You need a global turn, so China and Europe have to emerge from this stagnation, and if [they] don’t maybe we talk about a hard landing,” Lee said.
China in particular has been suffering from economic malaise since the government eased COVID-19 restrictions. A combination of high youth unemployment, challenging demographics, and a crumbling real estate market has put pressure on the second largest economy in the world.
The second risk to Lee’s bullish view is a melt-up in the stock market between now and the end of December.
“The second [risk] is if we have a parabolic move in December and we end up at S&P 5000 by December 31, you’ve pulled forward a lot of the gains for 2024, so the first half [of 2024] could be pretty bad,” Lee said.
The S&P 500 traded at 4,717 on Friday, about 5% away from 5,000.
Since October 27, the S&P 500 has surged 14%, the Nasdaq 100 is up 17%, and the Russell 2000 is up 22%. Meanwhile, the Dow Jones Industrial Average surged to an all-time high this week, while all of the other major indexes are within spitting distance of a new record high.
Such sharp moves higher in the stock market in such a short period of time could lead to a local top that requires months of consolidation before further gains can be had, and that’s the exact worry on Lee’s mind.
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