“I think a really strong message is coming to buy small caps, because when economic data picks up and credit eases, small caps almost always win,” Tom Lee told CNBC’s “Squawk on the Street” on Monday.
Lending further momentum to small caps, the firm sees fiscal stimulus — particularly in the G-4 nations of Brazil, Germany, India and Japan — picking up after five years of fiscal drag. Coming at a time of ultra-accommodative interest rates, the stimulus will be particularly effective and boost stocks, in Fundstrat’s view.
“The industrial recession’s ending, so you want to be more cyclical — tech, industrials, basic materials, energy,” he said.
Heading into year-end, Lee said Fundstrat is still bullish but a bit conflicted, as the potential for an interest rate hike from the Federal Reserve and the presidential election raise the risk of higher volatility, he told CNBC.