Renowned strategist Tom Lee says investors should take a 'leap of faith' on select stocks despite a crisis that's 'worse than the Great Depression'

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  • The coronavirus pandemic is a crisis that’s “worse than the Great Depression,” but investors should take a “leap of faith” and invest in stocks that would benefit from the reopening of the US economy, Tom Lee said in a CNBC interview on Friday.
  • Lee did not waver on his bullish call on stocks, but did say that in the short term, stocks are overbought and the market needs to digest its recent gains.
  • While a spike in coronavirus cases in some states is a valid concern, Lee is constructive on the fact that individual states can open safely, pointing to states like New York and New Jersey, among others.
  • Lee said he expects a “binary reaction” in the markets if there is a breakthrough in a COVID-19 vaccine or even cure, and the stocks that stand to perform the best if that happens are the “reopening stocks” like airlines, casinos, and hotels.
  • “The best-performing stocks after the dot-com crash were the internet names, because the ones that survived were structurally long-term winners,” Lee said, in defence of why he is bullish on the stocks.
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Tom Lee is not wavering one bit on his bullish call on stocks despite the global coronavirus crisis being “worse than the Great Depression.”

In a CNBC interview on Friday, the strategist said investors should take “a leap of faith” and invest in the “reopening” stocks that stand to benefit from the US economy opening back up.

Lee’s FundStrat prepared a list of these “epicentre” stocks that investors should consider buying as the economy slowly reopens. The “reopening” stocks include airlines, cruise lines, hotels, and casinos, among others.

“If these companies aren’t destroyed on both the equity and credit side, especially credit, I think they’re a lot more resilient than people realise,” said Lee. “If they’re showing durability here, these are actually really attractive companies because they survived the greatest stress test in over 100 years,” he continued.

“The ones that survive are going to be unkillable,” Lee explained.

Lee pointed out that “the best-performing stocks after the dot-com crash were the internet names, because the ones that survived were structurally long-term winners,” in defence of why he is bullish on the stocks.

Lee is also bullish due to individual states being able to safely open, pointing to New York and New Jersey as recent examples. Alternatively, surging coronavirus cases in states like Florida and Texas prove that the reopening process for states is a delicate process.

Lee said that it makes sense for stocks to cool off, given that they are overbought in the short term and consolidation is healthy for markets. Additionally, Lee expects selling into quarter-end as investors rebalance their portfolios following a strong quarter for stocks.

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But as long as the markets continue to hold their 200-day moving average, that’s “good news,” said Lee. The economy is resilient and we can still get a recovery “even if we’re wearing masks and social distancing,” Lee added.

Lee concluded the interview by observing that from the market’s perspective, any breakthrough in the development of a vaccine or cure for COVID-19 will help “investors see a real path to normalcy” and will benefit the reopening trade.

Lee pointed to $US5 trillion in cash on the sidelines and bearish sentiment as all the more reason to stay bullish.

“The lack of a vaccine has kept people really cautious, that’s why there’s $US5 trillion of cash on the sidelines, and AAII investor sentiment is the 3rd worst negative reading since this crisis started so people are as bearish today as they were when we nose dived to 2,200,” said Lee.

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