July has given investors some fireworks. The Dow Jones Industrial Average
just put in its worst day since late October on Monday. But for those hoping this might be a perfect opportunity for a bit of bargain hunting, Thomas Lee, founder of Fundstrat Global Advisors, has a word of advice:
‘I think July overall is just a month of chop, and one where no one should really try to be a hero.’
That is what the strategist told CNBC during a Monday interview, following a rout of the Dow, S&P 500 index
and the Nasdaq Composite
that had some investors wondering whether the decline was a selloff that rejuvenates the market’s animal spirits or a harbinger of things to come, as investors fret about the spread of COVID-19’s delta variant and the possibility that the pandemic could complicate the global economic recovery.
Lee told the business network that COVID cases rose last July and he’s expecting a similar pattern to unfold this year, even if it is a more transmissible COVID variant that is unsettling bullish sentiment. He acknowledges, however, that the market is being buffeted by uncertainty and that this month may be one where investors should avoid taking any additional big wagers.
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“I just think that Julys, at least in my 30 years of doing research, have never been great months for people to really make big profits,” he said.
“For the next couple weeks, I think it’s tough,” he said.
‘I think, again, the message that I would have [for investors] is [that] it’s not a month to be a hero.’
Lee warned investors back in late June that when markets are strong in the first half of a year, July tends to be choppy.
That said, Lee is still bullish on equities in the longer term and maintains his 4,600 year-end target for the S&P 500. “I think that stocks are still going to have a double-digit second half,” he told CNBC Monday.
He said that investors “shouldn’t extrapolate that we’ve lost the war against COVID.”
To be sure, investors are also worried about rising tensions between the U.S. and China and the possibility that the market is likely to see peak earnings, and economic growth could peter out, setting the stage up for a lackluster 2022.