- The S&P 500 could jump to 4,800 before October if the Fed doesn't reveal a hawkish surprise, Fundstrat's Tom Lee told CNBC on Wednesday.
- Lee sees the potential for 8% upside in stocks as a risk-on "everything rally" begins to take hold.
- Part of Lee's forecast hinges on the S&P 500 not selling off on Wednesday due to a DeMark "13" sell signal.
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A risk-on "everything rally" could drive the stock market higher if the Fed doesn't suddenly turn hawkish, Fundstrat's Tom Lee told CNBC on Wednesday.
"The Fed could change everything, so it is one of the conditions that could turn into a headwind [if there's a hawkish surprise]," Lee said. But given the ongoing spread of the COVID-19 Delta variant, Lee doesn't think the Fed will be too quick to tighten its monetary policy. "I would be surprised if anyone had the confidence to say now is the time to tighten," Lee said.
Lee said the S&P 500 could surge to 4,800 before October, representing potential upside of 8% from current levels as there are "a lot of pieces in place that really support a big move into the end of September," according to the interview.
Some of those in-place pieces include the potential for COVID-19 cases to peak in the US sometime this week, a US infrastructure deal in place, and an ongoing rally in bitcoin, among others.
Lee observed that investors remain cautious on stocks as many were expecting a decline in August, which is historically a weak month for the market. "If we have a risk rally, there's a lot of chasing that's going to take place" among investors, Lee said.
Lee's forecast for more upside in stocks hinges on the S&P 500 not selling off on Wednesday, as it would validate a DeMark "13" signal flashed last week. The DeMark indicator is a tool used by technical analysts that helps measure demand of a particular asset.
So far, the S&P 500 is cooperating, with the index trading up 0.2% as of Wednesday afternoon.