"This raises too many tail risk issues including credit tightening, commercial real estate and wide economic implications," Lee said. And yet, Lee still sees a balanced risk/reward setup for the stock market as the banking sector shows signs of stabilizing and earnings results hold up better-than-expected.
And if ongoing developments in the banking sector, economy, and stock market turn better-than-expected, then there's a massive $5.3 trillion pile of cash that could act as fuel to drive the next bull market in stocks. That's because, according to Lee, much of the cash that's been built up over the past couple of years was withdrawn from the stock market.
"Retail liquidations of S&P 500 and Nasdaq stocks exceeds [retail's] purchases since 2019," Lee told Insider on Friday, referencing data from Goldman Sachs. "I think stocks are flat vs. [a] year ago and sentiment far worse and there is way more cash on [the] sidelines. So there is definitely [a] flows story that could unfold," Lee said. LeeIf that massive cash pile starts to unwind, investors have few options on where to put it, and the stock market is likely a top choice.
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