Tom Lee, managing partner and head of research at Fundstrat, said the global stock market sell-off may turn out to be just a “growth panic”. “I think a lot of it depends on whether financial conditions in the U.S. start to tighten, meaning do markets start to fail?” Lee said Monday on CNBC’s “Squawk Box.” “But with interest rates coming down, consumers are still in good shape, and I think on the other hand, it’s looking like a growth scare.” The move follows last week’s sharp decline amid fears of a recession fueled by a weaker-than-expected U.S. jobs report. Stocks suffered a sell-off on Monday. The fallout prompted a correction in the Nasdaq Composite on Friday and stoked fears that the Fed waited too long to cut interest rates. The turmoil has spread to Asia, with Japan’s Nikkei plunged 12.4% in overnight trading. Meanwhile, the Chicago Board Options Exchange Volatility Index (VIX) climbed to its highest level since 2020 on Monday. The index, known as Wall Street’s “fear gauge,” has more than doubled to above 50 since Friday, when it was around 23. He recently called for a market rebound after the central bank last week, which ultimately happened. Lee also predicts that the small-cap Russell 2000 index will soar 50% in 2024. “The market has suddenly reversed for more than three days. [and] “Drops like this are usually symmetrical, but you have to watch the VIX,” Lee said. “When the VIX peaks and starts to flip and fall, the recovery may be just as fast.” Lee noted that the stock market rally may stem from the Bank of Japan. Investors also believe the market is witnessing the unraveling of the so-called “carry trade” as interest rates were raised last week to their highest level since 2008. The ability to borrow cheaper currencies to purchase other assets around the world. [Treasury] “It shows that the Fed has lagged behind, but when we look back, it was really due to Japan’s unexpected rate hike and the ripple effects from that,” Lee said. Know that this is going to be volatile for markets, but it’s not necessarily bad news for the U.S. economy. It said investors could see “a range-bound market at best” between now and October.
