‘I think investors just have liquidated so much of their holding in equities. We’re talking more cash on the sidelines today than there was in 2009.’
That’s one of the reasons Fundstrat’s Thomas Lee is looking for the stock market to bang out “significant new highs” by the end of the year, according to his interview on CNBC on Monday.
Even more than all that cash waiting to pounce is the potential for one of 133 coronavirus vaccine trials to deliver positive results. That, he says, is critical for the S&P 500 to hit his forecast of 3,450.
“It’s an essential view, meaning I think we have to have positive trial data, but I don’t think we need a commercial vaccine,” Lee said, adding a warning: “If we exhaust all 133 by December and none of them are succeeding, then there’s no way we do 3,450.”
The S&P 500 turned in a strong performance in Monday’s trading session, rallying almost 1% to close at 3,252. The tech-heavy Nasdaq Composite fared even better, while the Dow Jones Industrial Average barely budged.
Should his prediction for a strong finish to the year come true, Lee said he sees tech stocks, which have already paced much of the market’s gains, continuing their rally. “Tech’s share of U.S. market cap should be much higher in the future,” he explained.
Tech heavyweights had a big day Monday, with Amazon surging 8%, Tesla tallying a 9.5% advance and Microsoft gaining more than 4%.
Tech aside, Lee also sees a move back into stocks like airlines, cruise ships and casinos that were hammered when the coronavirus pandemic first slammed into the stock market.
“We think that if virus cases are plateauing and we get some good news on the vaccine, we’re going to see that rotation back into epicenter stocks, or what people call cyclicals,” said Lee.
Some of the names in that group he’s mentioned before include Exxon Mobil, General Dynamics, Alaska Air and Goldman Sachs.
This article originally appeared on MarketWatch.
