Thomas Lee Says Fiscal Cliff Deal + Mutual Fund Capitulation = $SPX Rallies Into Year-End

Source: Bloomberg TV via Thomas Lee
Thomas Lee, chief U.S. equity strategist at JPMorgan, expects the S&P to hit 1,430 by year end, up 1.7% from today's close (1,406). He believes a fiscal cliff deal is in the works, which could gap the market higher, and mutual fund capitulation is signaling a market low. Here is the chart he provided on Bloomberg TV today ("30 day beta of funds Benchmarked to SPX"). He said,

"what we saw was that on November 26, [mutual fund] market exposure fell to the lowest level, really I think you might have to go back to 2006 to find it lower. Which means there was a capitulation on mutual funds on the market, which really was a good basis to establish a low."

During the segment, Adam Johnson, Trish Regan, and Thomas Lee also talked about the volatility skew and term structure. Basically, you can see what traders are thinking in the options market by comparing call and put implied volatilities (the prices of options) or IV overall at different strikes and maturities (expiration months). Watch the video for more details. Let's see if JPM's U.S. equity strategy team can overpower the Distressed Volatility market poll. But, if there is no fiscal cliff deal, Thomas Lee, and even 3x-permabull Jeremy Siegel, both see a reactive sell-off. By the way, in Greece news, "Eurozone, IMF clinch deal on Greek loan and debt" (

Recommended posts powered by Google