Fundstrat Global Advisors managing partner Tom Lee thinks the U.S. Federal Reserve is done raising its benchmark interest rate.
In a new interview with CNBC, Lee says that’s he optimistic about the market and inflation numbers.
“I think [last week’s] CPI (consumer price index) report kind of shows that inflation’s on a glide path lower. The things that are still inflationary – like auto insurance, motor vehicle repair – aren’t things the Fed’s necessarily trying to target with higher rates, but it’s more of a supply-chain work-through.
So I think over the next three months, we could see core CPI at 0.2 or less. That would really allow the Fed to breathe easier, and that’s why I think the last hike was July.”
The Consumer Price Index (CPI) is typically used as a proxy to track inflation rates. Traders keep a close eye on the metric as it could potentially signal whether the Fed would continue to raise interest rates.
Last week’s CPI report indicated consumer prices rose 0.2% in July, which the White House described as “at market expectations.”
Lee, however, notes that many stock market traders do not share his optimism.
“I don’t think people are even that bullish. I mean this week everyone’s been quick to turn bearish. One just has to look at the comments from a lot of folks and they’re already back in the hard landing camp…
Yet we know investors pulled $115 billion out of the stock market this year and there’s $500 trillion in cash, and mortgage rates could drop pretty dramatically. If the Fed is done and the [US 10-year treasury note] stays at [4%], mortgages should drop to 5.5%. That’d be hugely stimulative next year.”
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