According to external sources, Tom Lee, co-founder of Fundstrat, argued that the market interpreted the Fed conference this week as being too hawk-oriented. According to him, the new Federal Reserve Chairman, Kevin Warsh, placed more emphasis on real-time data than on the usual forward-looking guidelines of the past, so that the meeting did not necessarily imply a shift in policy positions towards tightening.
Lee said the meeting wasn't necessarily for the eagle.
Lee states that Warsh communicates differently from his predecessor and prefers modern, real-time alternative data to observe inflation and economic change. The market's preference for eagles is partly due to the Federal Reserve's weakening of forward-looking guidance and its reduced reliance on point-form maps.
In his view, there was a real concern that future Federal Reserve projections might be rapidly adjusted with data. Policy paths may also be revised faster if inflation or growth data change. From that point of view, the meeting was instead biased towards pigeons, as there was no strong established judgement at the decision-making level.
Still looking at the current stock market.
Turning to the United States share, Lee stated that, despite the complexity of the market ' s reaction to the meeting, he had not changed his judgment about the current environment for the time being. According to him, stock market conditions remained favourable and it was not yet time to judge the top.
At the same time, he reiterated that the market environment could change suddenly later in the year, with a “very bear-like” return. This judgement does not mean that he is now blind, but that the risk is more likely to be concentrated in the subsequent phase.
Focus on leverage and speculative financial changes
Lee listed a risk signal that he had focused on, namely, when the driving force of speculative funds diminished. He indicated that such a change could occur after the bond debt had risen to a level common to short-term reversals, or after the large off-the-shelf cash-flow market.
He added, however, that he had yet to see that investor sentiment was extremely optimistic and that the conditions to trigger a rapid market turn were not yet fully in place. This is also why, in his view, the stock market is still holding back in the short term but may increase volatility in the future.
Additional information:Lee also mentioned SpaceX's IPO as an example of market resilience. In his view, such large and popular transactions were still receiving attention, suggesting that risk preferences had yet to decline significantly.