Don't sell during the Russia-Ukraine 'panic' because stocks will bounce back, Fundstrat's Tom Lee says
Fundstrat's Tom Lee said things look "treacherous" now but the picture should clear and stocks should rally in the second half of the year.
Russian Defense Ministry Press Service/Associated Press
- Stocks should rally in the second half of 2022, and investors shouldn't sell during the Russia-Ukraine "panic", Fundstrat's Tom Lee said.
- He said stocks often fall in the run-up to an invasion, then rally when the incursion itself occurs.
- The well-known market bull said the fading of the Omicron virus wave should add to tailwinds for the economy.
Stocks should rally again in the second half of the year, and investors should be wary of selling during the Russia-Ukraine "panic", Fundstrat's Tom Lee has said.
"We think any panic around Russia-Ukraine will be short-lived. And hence, we would not be sellers on this panic," Lee, the former head of equity strategy at JPMorgan, wrote in a note to clients Tuesday.
Stocks have fallen sharply in recent days as Western governments warned that Russia could imminently invade Ukraine, having amassed more than 100,000 troops on its neighbor's borders.
Tensions flared dramatically Monday when Russian President Vladimir Putin ordered troops to enter rebel-held regions in eastern Ukraine. The US, EU and UK are readying economic sanctions in response.
Lee, a well-known market bull, said there were a number of reasons to stay committed to the market despite the range of worries that are troubling investors.
One is that markets often fall in the run-up to an invasion, then rally when the event actually occurs. Lee said a "buy the invasion" policy might therefore be appropriate.
He said US companies have little exposure to Russia, and that falls in stock prices are due to fear and uncertainty rather than any fundamental impact on earnings from the situation.
The fading of the Omicron coronavirus wave should add to tailwinds behind the economy, as consumers get spending again, the strategist added.
"The set-up remains that we see equities as treacherous in 1H but stronger in 2H," Lee wrote, referring to the first and second halves of the year.
The S&P 500 index of blue-chip US stocks was roughly flat Tuesday despite the perilous situation in Ukraine. It was down roughly 9% for the year, however, as the Federal Reserve's plans to raise interest rates have weighed heavily on stocks in 2022.
Analysts at Goldman Sachs said Monday the S&P 500 could fall a further 6% if there is outright conflict in Ukraine and Western governments impose harsh sanctions on Russia.
Many strategists have cautioned that the outlook is unusually uncertain and that volatility is likely to stick around over the coming months.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note Tuesday: "We think investors with diversified portfolios and a long-term investment plan would be well-prepared in case of an escalation as well as a relaxation of tensions."