Tom Lee: 'Back the truck up' after sell-off

Investing.com -- Following Wednesday's sharp stock market decline triggered by the Federal Reserve's updated rate outlook, Tom Lee of Fundstrat Global Advisors told investors to remain optimistic, calling the downturn a "back up the truck moment."

The Federal Reserve's revised projections for 2025 signaled fewer rate cuts than anticipated, sparking a significant sell-off.

Despite this, Lee maintained that the reaction is likely to be temporary.

"This was a painful day, but the fundamentals did not change. This is why we see this as a 'back up the truck' moment," he wrote in a note, CNBC reported.

Lee cited several reasons for his confidence. He pointed to the CBOE Volatility Index 's (VIX) 74% surge on Wednesday, the second-highest increase on record, but noted that historically, stocks have rebounded within a month following significant VIX spikes, he explained.

Additionally, Lee said that the S&P 500 is now testing its 50-day moving average, a level from which it rallied earlier this year.

While the Federal Reserve's tone appeared more hawkish, CNBC highlights that Lee argued that the central bank remains fundamentally supportive of markets, albeit with reduced clarity as 2025 approaches.

"The Fed remains supportive of markets," Lee stated, adding that the central bank appears to be opting for a slower, measured approach.

Lee believes the sell-off presents a unique buying opportunity, particularly for small- and mid-cap stocks. He pointed to regional bank BancFirst (NASDAQ:BANF ), Spotify (NYSE:SPOT ), Carvana (NYSE:CVNA ), and Shake Shack (NYSE:SHAK ) as promising investment options.

"This panicked reaction will be short-lived," stated Lee.

Source: Investing.com