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(This is an actual research report from Tom Lee’s FS Insight by Fundstrat, reprinted for CNBC Pro subscribers with permission. CNBC readers get 15% off FS Insight by Fundstrat — Tom Lee’s premium market research — plus a 30-day free trial. Click here to claim your exclusive offer.) For the past 2 days, equities have risen at the open, only to see stocks fade through the day and close down. This is what Mark Newton, Head of Technical Strategy, calls a “bearish engulfing” pattern. That sounds ominous, but it really means that stocks are digesting gains. Month to date, S & P 500 is up 3% and it is natural to see some flattening into the end of the month. On the trade front, it looks like the August 1 deadline will apply to most nations with the possible exception of China. I don’t view this as a macro negative. Equities and companies have absorbed a lot of these tariffs and these trade deals have been favorable to the US exporters. The White House said President Trump needs to approve any extension, as it relates to China, so we will know in a few days. This is a heavy macro week. The two keys will be FOMC meeting on Wednesday and the Jobs report on Friday. Regarding July FOMC (Wed), we think the probabilities favor equities rising post-July FOMC rate decision. We realize the odds of the Fed cutting are zero. This was also true of the March and May 2025 meetings: but notably, equities gained 4% to 5% (10 days later) after each meeting this is a break in pattern where stocks had mixed performance post-FOMC since 2024 and keep in mind the Fed was on hold both meetings To us, July is different. The Fed has some sense that inflation might pick up. But the narrative is less “inflation set to rise” and more of “a temporary rise in reported inflation” — the latter gives the Fed the runway to begin cutting in the Fall. If markets see odds rising of a cut in the Fall, equities should strengthen. Of course, the Fed could simply pour cold water on this, citing the economy is strong enough with current rates. But labor market trends are not signaling universal strength. Look at JOLTS (job openings) which are languishing. So we think the Fed has to walk back its inflation views modestly, while the labor market conviction on strength has diminished. Overall, a positive setup given stocks are down the last 2 days. BOTTOM LINE: Still “most hated rally” This still remains the “most hated” V-shaped stock rally. We view Bitcoin as a leading indicator and thus, we expect stocks to reattain all time highs, which Bitcoin achieved last week. We see S & P 500 reaching 6,600 by year-end. And the expected drivers for this upside are: Still most hated rally Sizable perception gap: Tariff “bark worse than bite” Hedge funds increased short interest recently $7 trillion cash on sidelines Investment outlook better now than in Feb 2025: tariff visibility, tax and de-regulation visibility, US cos survived 5 major “stress test,” Fed more dovish in 2026 (Enjoyed this report? CNBC readers get 15% off FS Insight by Fundstrat — Tom Lee’s premium market research — plus a 30-day free trial. Click here to claim your exclusive offer.) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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