History shows that stocks have done well even under the most hawkish Fed, and Chairman Jerome Powell doesn't need to crush the market to rein in inflation, according to Fundstrat head of research Tom Lee.
In a note on Wednesday, he reiterated his bullish stance on stocks despite investors' fear over looming rate hikes. Central bankers have raised interest rates 450-basis-points over the last year to tackle high prices – a move that weighed heavily on stocks in 2022, and could continue to do so as officials signal more work to bring down inflation.
But that doesn't have to hinder the success of stocks this year, Lee said, pointing to the market's performance in past Fed tightening cycles. Out of 14 such cycles since 1970, stocks posted gains in 11 of those periods. Lee also noted the rally under former Fed Chair Paul Volcker, who helmed the central bank during the stagflation crisis and, sparking a deep recession in the early 1980s. That's the most hawkish the Fed has ever been, but stocks jumped 15.6% during Volcker's reign, Lee said, posting the highest gain under any Fed leader.
That suggests stocks could still perform well this year if the Fed continues to lift rates, despite a brutal few weeks for the market. TheAnalysts have warned the Fed could
When was he right?
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