Fundstrat: Individual investors are returning to the stock market, and the next 18 to 24 months could see the "best investment period of a lifetime."

Tom Lee, head of research at Fundstrat, stated that as retail investors begin to reallocate funds back to the stock market after experiencing a flight to safety caused by geopolitical conflicts, the next round of gains in the US stock market is about to take off. Lee pointed out in an interview that despite these investors choosing to stay on the sidelines during the early stages of the US-Iran conflict escalation, they are now "starting to reinvest funds back into the stock market." He expects that driven by solid fundamentals such as upward revisions in profit expectations, retail investors will eventually "chase after this round of gains". Lee analyzed that the initial response of retail investors to the Iran conflict, which leaned towards risk aversion, broke the pattern of their usual "buy the dip" strategy during market disturbances such as trade frictions in the past. He attributed this hesitation to "policy confusion", believing that investors "cannot assess the escalation potential of this conflict" and fear that surging gasoline prices may trigger an economic recession. "I think investors see the outbreak of war as an opportunity to reduce risk exposure," Lee said, noting that sectors such as software stocks and the "Fab Five" technology stocks experienced massive selloffs at that time. While retail investors are still on the sidelines, hedge funds have already started to reinstate risk positions in their portfolios. Lee confirmed this trend through a survey of Fundstrat's clients, emphasizing that the "major downside risks associated with war have been alleviated". The advance positioning of institutional funds paved the way for retail investors to enter the market faster. Despite concerns about gasoline prices among the public, Lee believes that the actual situation of American consumers is better than the levels reflected in sentiment surveys. He stressed that the inflation-adjusted gasoline prices are "far from the burden levels seen five years ago, ten years ago, or even at the peak in 2008". In addition, Lee pointed out that "war actually stimulates the economy", with improvements in profit expectations, ISM manufacturing data, and employment reports showing the underlying resilience of the economy. Lee continues to be overweight on US stocks, viewing the US market as the "growth index benchmark" that global investors seek opportunities in. He noted that "the supply chain issues exposed by this war actually strengthen America's relative advantage", combined with America's sustained leadership in technology, healthcare, and fintech sectors, he predicts that US stock valuations will not contract but expand. Looking ahead to longer-term prospects, even considering short-term challenges such as the change in Federal Reserve chairmanship, Lee still gives an extremely optimistic assessment: profit growth and valuation expansion are expected to jointly push the market higher, making the next 18 to 24 months "possibly one of the best investment stages we have ever seen in our lifetime".