Fundstrat's Tom Lee Calls Monday Market Selloff An Overreaction, Sees Stabilization Ahead

Tom Lee, the research head of Fundstrat Global Advisors, has labeled the recent stock-market plunge as an overreaction.

What Happened: Lee’s comments come in the wake of increased recession probabilities from Goldman Sachs and Moody’s economists, and the stringent trade policies of Canada’s incoming prime minister, Mark Carney. These elements, according to Lee, have exacerbated investor anxieties, reported MarketWatch.

Despite the current market turbulence, Lee anticipates potential stabilization. He noted that investors are assessing the scale of trade disruptions, comparing their impact to Brexit, and drawing parallels with the response to Federal Reserve Chair Jerome Powell‘s 2022 comments on the economic measures necessary to curb inflation.

However, Mark Newton, head of technical strategy at Fundstrat, stated that while investors have not yet sold-off their assets completely, there are indications that a market low may be nearing.

Why It Matters: This comes after Monday’s heavy selloff, which saw the Nasdaq 100 index QQQ fall 12.56%, and the S&P 500 SPY drop 8.67% from its previous high. While the Nasdaq 100 had entered the correction zone last week, the S&P 500 was nearing the same territory. The S&P 500 lost $4 trillion from its high on Feb. 19 when Wall Street was optimistic about Trump’s policies.

U.S. stock futures, however, rose on Tuesday following the selloff, indicating a potential rebound. While most analysts see this as a sign of a bearish market, Tom Lee still sees prospects of stabilization.

According to Lee, President Donald Trump‘s impending remarks at the Business Roundtable, scheduled for Tuesday, are also expected to draw significant attention. Tom Lee mentioned, “Observers will be attentive to whether CEOs can influence White House tariff policies amid growing backlash, including opposition from Senator Rand Paul.”

Lee also highlighted the importance of key data from the job openings report, the consumer price index, and the producer price index, as well as the Friday deadline for government funding are likely to contribute to market stabilization. He also noted a surge in the probability of a May rate cut to 49%, as per the CME’s FedWatch tool, indicating the Fed’s implicit backing.

The viewpoint of Mona Mahajan, the investment strategist at Edward Jones resonates with Lee. She stated that pullbacks are typical and that a bear market had not been confirmed.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.