By Tom Lee, a well-known long-term bull and co-founder of Fundstrat Global Advisors, has recently revised his outlook for the S&P 500, warning of a potential 10% pullback over the next eight weeks.
Despite his historically optimistic stance on US equities, Lee’s latest comments signal a cautious period ahead for investors, with the benchmark index poised for a possible decline through the end of October.
What could hit US stocks in September?
Lee’s caution stems from a combination of factors that could impact the S&P 500 negatively.
The index, which has surged approximately 20% since the start of the year, is currently experiencing strong performance.
However, the anticipated rate cuts by the Federal Reserve in September and the approaching US presidential elections could introduce volatility and nervousness among investors.
The upcoming monthly jobs report from the Bureau of Labor Statistics is also a key concern.
Lee suggests that disappointing job data could act as a near-term catalyst for a downturn in US stocks.
The recent underwhelming nonfarm payrolls data for July has already reignited fears of a potential economic slowdown.
Historically, September has been a challenging month for the S&P 500, with the index averaging a 0.7% decline each year, according to the Stock Trader’s Almanac data dating back to 1950.
Despite this pattern, the S&P 500 has ended seven out of the eight months this year in positive territory, highlighting the current market’s strength.
Should investors buy on the weakness?
Despite the short-term risks, Tom Lee remains optimistic about the long-term prospects for the S&P 500.
He advises investors to view the anticipated pullback as a buying opportunity rather than a reason to panic.
His recommendation is to “be cautious, but ready to buy the dip,” signaling a strategic approach to investing during this potential period of weakness.
Lee’s bullish long-term outlook aligns with that of John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management. Stoltzfus also expects a pullback through October to create attractive buying opportunities for long-term investors.
He maintains a year-end target for the S&P 500 at 5,900, suggesting a potential 6% upside from current levels.
Oppenheimer’s year-end target for the S&P 500 remains one of the highest on Wall Street, reflecting continued confidence in the index’s ability to deliver strong returns despite short-term fluctuations.
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