'Bottom passed': Fundstrat expects US stocks to record gains after Iran deal

The US stock market has already reached its bottom and is ready not only to return to record highs, but also to grow even more on the back of a ceasefire agreement between the US and Iran, Tom Lee, founder of Fundstrat and head of research at Fundstrat Global Advisors, told CNBC. Fundstrat co-founder and head of research at Fundstrat Global Advisors Tom Lee told CNBC. Despite the fragile truce in the Middle East, the strategist expects the S&P 500 Index to reach 7,300 points by the end of the year, which implies a 7.6% increase from its closing price on Wednesday, April 8.

"I believe the bottom [in the U.S. stock market] has been passed, as there was a period last week when the war situation was deteriorating, oil was getting more expensive, but stocks were not falling," Lee noted. "Today we see a change in momentum - the war is moving toward de-escalation," he added, noting that stocks are "in the process" of returning to their all-time highs(quoted by CNBC).

Although Brent crude prices are still more than 30% above pre-war levels (around $98 a barrel versus $72.8 at the end of February), Lee remains optimistic: "The negative correlation to oil during the war was the highest in almost a decade for the Magnificent Seven, Ethereum and software companies. So I think that either as [the situation] stabilizes or as oil prices come down, these assets will be in demand - especially since they've already had time to fall in price."

The major U.S. stock indices ended the session on Wednesday, April 8, with the S&P 500 Index rising 2.51% to close at 6,782.81 points; despite this recovery, it still trades about 3% below its January all-time high of 7,000 points. The Dow Jones Industrial Average jumped more than 1,300 points, or 2.85%, on April 8, posting its best performance in over a year.

Lee expects the rally in the U.S. stock market to be led by several asset groups at once, including the "Magnificent Seven" - Apple, Alphabet, Amazon, Nvidia, Meta Platforms, Microsoft and Tesla. The Roundhill Magnificent Seven ETF (MAGS), a specialty fund tracking shares of Apple, Microsoft, Nvidia and other tech giants, was up 2.6% on April 8, but despite that rebound, it's down more than 2% since the war in the Middle East began. Along with the shares of the "Magnificent Seven" as leaders of future growth, the strategist highlights the securities of software companies, as well as the energy and financial sectors of the U.S. stock market.

Lee also turns his attention to cryptocurrencies, particularly Ethereum, which he called the "most profitable" asset since the war began. Since late February, when the war in the Middle East began, the cryptocurrency has risen about 10%, from about $1950 to its current $2180.

This article was AI-translated and verified by a human editor