Tom Lee says Monday’s 2.3% S&P 500 rally backs his view that last week’s selloff was the bottom. The Fundstrat managing partner cited a reversal in Wall Street’s volatility signals.
The call matters for holders of AI and megacap tech shares, who absorbed most of last week’s damage. However, Kevin Gordon, head of macro research at Schwab, warns that one strong day does not prove a bottom.
Why Does Tom Lee Read the VIX as a Bottom Signal?
Lee pointed to the Cboe Volatility Index (VIX), Wall Street’s fear gauge. Its term structure, which compares four-month and one-month readings, inverted last week and normalized on Monday.
Lee said that normalization usually marks a bottom. He also read the rally through weekend bad news as a healthy sign.
Nvidia (NVDA) fell about 4% after its board opened a probe into CEO Jensen Huang’s admitted affair. The S&P 500 itself closed at 7,549.94 for its best day since April.
Lee had argued for buying the AI dip last week. On CNBC, he summed up his view.
“I think markets are a lot safer than people think.”
Tom Lee, managing partner and head of research at Fundstrat, speaking on CNBC
Does Breadth Back the Rebound?
Gordon argues the better signal sits beneath the headline index. The equal-weighted S&P 500, which gives every company the same influence, kept beating the market-cap-weighted version through last week’s selloff.
Nearly 60% of index members also held above their 200-day moving averages by Friday, he said. He added that the stress centered on leveraged tech bets that predated the midterm elections.
Meanwhile, Chris Hyzy, chief investment officer at Bank of America Private Bank, found support in financials. He said their strength points to coming deal activity and intact lending margins.
Gordon said megacap tech sways the index so much that a cap-weighted rally says little about the typical stock. Inflation data due this week could test the rebound, and a renewed VIX inversion would undercut Lee’s read.
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