FAANG can fight the Fed, Fundstrat says
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Current Fed policy does not mean that stocks have to keep falling, Tom Lee, head of research at Fundstrat says.
"Investors tell us they donât want to 'fight the Fed' and as long as the Fed is tight, they will not touch equities," Lee wrote in a note. "This is intuitively sound, but (there) are some issues with this thinking."
Inflation could fall faster than the Fed expects, the Fed is trying to tighten financial conditions broadly and the Fed is not targeting specific stocks, he said.
So, FAANG - Facebook (META), Amazon (AMZN), Apple (NASDAQ:AAPL), Netflix (NFLX), Google (GOOG) (GOOGL) - "doesn't need to keep getting pummeled," he adds.
"In other words, this current Fed policy stance doesnât mean stocks have to keep falling," he added. "There is simply no way for the Fed to titrate and create equilibrium in stock prices this way."
"In fact, looking at the scenarios below: In our view, markets are focused on the 'left tail' risks of Hard landing, recession," Lee said. "Our base case is that US is facing a 'growth scare' and means 20% decline fully discounted this."
"FAANG valuations are attractive and we favor OW FAANG/Tech here."
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