Stocks are facing a pivotal moment this week as the Fed could deliver the last rate hike of its tightening cycle – a move that could cause the S&P 500 to retest its all-time-high from early 2022, according to Fundstrat's Tom Lee.
In a note on Monday, Lee pointed to broad expectations that the Fed will deliver another 25-basis-point rate hike this week, after having raised interest rates 475 basis points in the past year to lower inflation. Markets are pricing in a 86% chance of a quarter-point increase after the next policy meeting concludes on Wednesday, and a 62% chance the Fed will begin to pause interest rates in June, per theA Fed pause could be a"make or break" moment for stocks, Lee said, as steep rate hikes weighed heavily on equities in 2022.
"This will likely be the last hike of the cycle. This is thesis changing," Lee said, forecasting the S&P 500 could notch 4,750 by the end of 2023, close to its record high of 4,796 in January of last year. That's largely because easing inflation indicators could pressure the Fed to hold back on its hawkish monetary policy, Lee said. Prices have been on the downtrend since June of last year, including key categories like
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