Tom Lee: “This Is What a Market Bottom Looks Like”

Tom Lee, now he's here with us at Post 9. It's good to have you back. Great to see you. Your thoughts as you look at these markets. It's been a real interesting price action over the last couple of days. I thought our reporters set the table very well on the issues at hand that investors need to keep their eyes on. What about yours? Yeah, I think the headlines have been scary. No one wants to see the U.S. in a conflict. But I think it's been spot on to note that markets have been taking this much better than expected. I don't think anyone can say we're bottomed yet, but this is what looks like the makings of a bottom, right, that you get bad news and the markets are taking it in stride. And more importantly, I think we've had a position reset. And so on the other side of this, I think it's going to be a lot of opportunity. What would give you the confidence to say, you know what, that's a sign of a bottom? What do you need to see? Well, some things like if we go back to April, a simple thing would be the VIX making a spike to over 40. You know, last year was 80, but we won't get to 80. And then, of course, retracing. That would be a clean sign because that's so much de-risking. Another sign would be we get another scary headline and gold continues to sell off. And then stocks actually turn green on the day because that means we've washed things out. I think we're pretty close. You're watching oil as closely as everybody else is. I thought it was interesting. Some of the notes today, UBS says we expect only minimal or a brief disruption to global energy supplies. We therefore stick with our base case that U.S. equities, excuse me, will produce good gains this year. Katie Huberty over at Morgan Stanley, recent geopolitical events unlikely to change our bullish view on equities over the next six to 12 months. Yeah, I mean, I think oil, I think we got we saw things that kind of made sense to me. Oil spiking on the on closures or potential closures of the Strait of Hormuz. But the response from Washington. And I think that's maybe more important that I don't think Washington wants high oil prices into the midterms. And of course, it's very unpopular with Americans. I mean, it's a big burden. So I I'm going to be in a camp that I'm watching the price action. I think it's encouraging that oil is not surging into the close. Part of the Huberty note focuses on the A.I. trade, which has been really interesting, I thought, over the last couple of days back, some might say to the safe haven type price action. I mean, look at right now, Microsoft's up, Meta's up, Amazon's up, Nvidia's traded better over the last couple of days. What do you make of that? Well, in our view, March was the makings of a bottom because the software, the Mag seven and the cryptos we thought were like 90 percent through to their, you know, their winters or declines. They are outperforming. And I think that's a sign of leadership. But fundamentally, you're absolutely right. If we get higher, if we get global trade disruption, you still need A.I. and you still need to make seven. So I think they're actually good fundamental stories. There's a technical side to this story to stay with me just a second, because certainly one of the key questions facing investors, what to do in the markets given the unrest in the Middle East and the uncertain road ahead. Our next guest, in fact, is watching the charts for some clues. BTIG is Jonathan Krinsky joins us now. It's good to see you. A note from from yesterday said, quote, When missiles fly, time to buy. Expand on that thought, if you could. Good to see you, Scott. So, I mean, I think, you know, if you look throughout history, geopolitical conflicts are rarely a long lasting negative catalyst for markets. They tend to be short term isolated events. And, you know, once we get some clarity on the event, the de-risking kind of tends to reverse. And there's something you ask, Tom, you know, what do you need to see to see a tradable bottom? So there's things we watch similarly to kind of give us clues to that. You know, one thing you mentioned, the VIX, we look at the VIX curve. So looking at spot VIX versus the second month future, that was inverted by about four points. That's the most since last April up below. So there's certainly room for it to invert more. But that's a sign that you're probably in the later innings of the sell off when you finally see that inversion. As far as oil goes, we look at the energy stocks relative to oil. So this morning, crude oil was up about 8 percent. But the energy stocks, if we look at the XLE, was unable to take out yesterday's high. And in fact, it traded red well before the recent headlines that caused oil to give up its gain. So those are two signals we were watching. And I think finally, if you look, you know, kind of at the internals in the market, what's what's working, what's not. We kind of have a first in first out with areas like software, which has been when that was one of the first groups that went green this morning. So it seems to us like that is fully washed out. And then finally, they're finally selling the leaders, right. The memory stocks, I think, were kind of the final holdout in this in this bull market. We saw Korea, which is an area we were cautious on last night, down about 7 percent. So a lot of the memory names trade in sync with Korea. So we're finally seeing those those last holdouts kind of get sold. And I think that's another sign that we're probably towards the later innings here. All right. We'll make that the last word. I appreciate you joining us with a really good look and a simple to understand one on all things that are happening from a technical standpoint, perhaps within the market. Let's bring in now the Wharton School professor of finance, Wisdom Tree chief economist Jeremy Siegel. Fundstrat's Tom Lee, of course, is still with us. Professor, it's good to see you. Love your thoughts here on what you make of these market moves over the last couple of days based on your experience. Yeah, well, you know, when I sent my notes over at noon, Scott, I said we have to keep the Straits of Hormuz open. I said that was critical. And the news we got over the last hour is is is really good about that. I certainly expected the U.S. to provide insurance, but we need the escorts. And I think success on escorting tankers through would be a big political victory. For Trump, you know, some of the early developments that we had hoped for, you know, the rising up of the Iranians, the replacement of the supreme leader by someone that would negotiate with Trump. That has not happened so far. So I think the next step is if we can open, keep that straight open. Iran has said, you know, we're going to prevent tankers from going through. That would be a political victory. And I think that would be very, very positive for the market. But that that's going to be something that I think we all want to want to see over the next week or so. Professor, you've seen a lot of markets during times of turmoil, certainly war and and other events that have shaken investor confidence at times are, in fact, those moments what the charts have suggested to Jonathan Kerensky missiles fly time to buy. Yeah, generally, you know, that the the fright of war and the angst of war has been a time to to buy, you know, in World War One started people that the exchange was so nervous that there was going to be a total collapse. They closed the New York Stock Exchange for six months, which is the longest period of time in U.S. history it's ever been closed. But the war actually happened to be good for the U.S. economy. So when they reopened, its stocks were rising and then they just absolutely so soared up to two new highs. So that sort of told people, you know what, you know, wartime is not always a bad time for the markets. And certainly we're not in a World War One, World War Two. So let's hope it doesn't get that way. But it had those periods, you know, when VIX is above 20, you know, I know Tom wants it to go above 40. That would be the spike that that would probably mark the bottom. But it means there's an awful lot of hedging that is going on, a lot of risk positioning. If if we get through this war with some of our objectives through, I think we're we're ready for a big bull market in 2026. Want to opine on that? Yeah, I mean, I agree with almost everything said by both Krinsky and Jeremy Siegel that this is all the hallmarks of creating some good opportunities. So I think investors do need to look beyond the headlines, maybe think three months, maybe even a month forward. And we just have to kind of wash through this bottom. But we already know where the leadership could be coming from. It's the software, the mag sevens and even the cryptos. Professor, does this, like Tom's suggesting, perhaps rekindle the the mega cap trade in some respects for the idea that at times of turmoil within the markets, these have tended to be a bit defensive? Yeah, well, I remember once we thought that Apple was the big defensive stocks, you know, when there's times of potential recession or international disturbances, really no stock is totally immune. And, you know, we really need to get through this, I think, for the bull market in both segments of both the value stocks and the rotational stocks as well as the mag seven. But, you know, let me tell you, when you take a look at some of those mag seven stock like Nvidia that selling in the low 20s, some even say lower in terms of price earnings ratio, that is an awful lot of discounting. Let me tell you, for a company that has been growing 30, 40 percent a year. Yeah, you would agree, though, in the in the bigger picture, as as we wind our conversation down, that energy that complex and oil prices are the most important thing to watch right now, not only for from a sentiment standpoint, obviously for the economic fallout perspective and then how it relates to the Fed as well. And how it is going to be. Yeah. And as you know, as Tom mentioned, I mean, you know, we are coming to the midterms and, you know, we have had low oil and gas prices under Trump. Now, the wholesale price of gas, let me tell you, has gone up 50 cents over the last three days. Now, it takes about a week to work into the pump. I worked it out that if it does go up by 50 cents, we will you know, we will be in the middle of what the gas was during the Biden administration. But no more Trump discount that he was counting on early on. So it's not only, you know, a question about the Fed does and the economy. It really is going to be important for the political outlook. Tom, you get the last word. Yeah. Well, I'd say I think investors just need to be kind of patient, cautious and wary, have a bit of firepower. But I think opportunities are emerging. Gentlemen, I appreciate very much the conversation, as always. Professor, we'll talk to you soon. Tom, thanks for coming to Post 9.