Stocks headed for red-hot gains, mirroring rebound in 2009: Fundstrat

But stocks are still set to post strong gains, according to Lee. Inflation has been falling from its highs of last year, and while the yield curve is flashing a warning for an imminent recession, that's mostly because inflation is expected to be higher in the following years, despite still being on the downtrend, he said. weighed stocks down 20% last year

. Though some investors are pricing in a 50-basis-point rate hike in March, Lee predicted the Fed would raise rates by just 25 basis points. A smaller rate hike is dovish by comparison, which could jump start a hot rally over the next eight weeks. His forecast is supported by the strong rally the S&P 500 saw over the first five days of the year. In the past seven occasions since 1950, a strong first week has led to an average gain of 6.8% over March and April, Lee said, adding that February was likely a minor setback in the overall uptrend.

"Median gain of March and April are the strongest," Lee said."Hence, we think the next 8 weeks is a period of 'buy the dip.'

Inflation is not yet slowing. The latest inflation indicators suggest we are not out of the woods yet.

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