Stock market bull market won't be derailed by Fed jitters or Middle East tensions, say 4 Wall Street pros

• As much as investors are worried about the many unfavorable factors, the bull market in stocks still exists.

• Last week, stocks fell on fears of a Fed rate cut and heightened tensions in the Middle East.

• But Wall Street experts say there are signs that the long-term bull market in stocks is intact.

Wall Street veterans say investors have grown increasingly uneasy about the trend in stocks in recent weeks, but the bull market hasn't derailed.

Over the past week, as investors digested the Middle East conflict promotion and monetary policy concerns, the U.S. stock market has been lower. higher-than-expected inflation in March led investors to lower expectations of a 2024 interest rate cut, and the major stock indexes fell last week. Last weekend, Iran attacked Israel, investors flocked to the safe haven of U.S. Treasuries, the stock market was again hit.

But some seasoned investors say that in the face of a booming U.S. economy and the potential upside of artificial intelligence, the recent worries may be just a blip on the radar, signaling that the bull market in stocks is far from over.

Here are the views of four Wall Street professionals who believe that investors should not worry about the recent stock market downturn:

Tom Lee, Research Director, Fundstrat

Fundstrat's Tom Lee argues that investors should buy stocks in a downtrend because the March inflation report wasn't as bad as expected.

In a recent Frequency Update, Lee noted that year-over-year price increases for more components of the Consumer Price Index were below 31TP3 T. This is a welcome sign that inflation is on track to fall to the Fed's price target of 21TP3 T, even though the economy's aggregate prices were higher than expected last month.

He added that aggregate inflation was largely driven by a surge in auto insurance. This suggests that a rate cut in June is still possible, he said, even though the market has mostly ruled it out according to the CME FedWatch tool.

"Believe it or not, this is actually a very good CPI report," Lee said." It just tells you that it's a timing issue, not a structural issue. In other words, there's no other reason for the CPI to go up."

James Demmert, Chief Investment Officer, Main Street Research

Stocks are still in a long-term bull market and the recent correction is the latest buying opportunity for investors, Demmert said.

"Tensions in the Middle East, rising bond yields, and concerns about the Fed delaying a rate cut have triggered a stock market correction," Demmert said in a report Tuesday. "The stock market has been on a rollback for some time now, as we haven't seen a 8-10% rollback in six months.

In his view, the magnitude of the correction will depend on whether the tension in the Middle East continues to escalate, but even if it does, it will not derail the bull market.

"We are buyers of this stock market correction because, despite the current headlines, we believe we have entered a new bull market led by the power of Artificial Intelligence," Demmert said. This new bull market could last another 7-9 years, as AI is expected to drive companies full-steam ahead to dramatically increase productivity, thereby boosting corporate earnings."

Dan Ives, Analyst, Weatherbush Securities

Ives said that despite the recent headwinds, technology stocks will continue to soar as corporate earnings are expected to grow strongly in the first quarter.

Consumer spending and digital advertising growth trends for internet companies were "strong" in the first quarter, according to a survey by Wedbush. That could be good for tech giants including companies like Alphabet, Amazon and Meta, Ives said.

Wedbush also predicts that a huge wave of artificial intelligence spending will boost the stock market. The firm predicts that AI investment will reach $1 trillion over the next decade, with the second, third and fourth waves of spending set to sweep across the industry in the coming years.

"We see the recent risk-off environment and tech sell-off as a clear buying opportunity for the upcoming tech earnings season," Ives and other analysts said in a report Sunday." While hot CPI, weak bank earnings and geopolitical concerns have put pressure on the stock market, the stage and bright lights of Broadway are now focused on the upcoming critical tech earnings season, which we believe will be stronger across the board."

John Flood, Head of Equity Sales Trading, Goldman Sachs Americas

Flood said this week that the stock market is still on track to move higher by the end of the year. He pointed to a number of positive catalysts at the front of the market, including a historic post-tax season surge, an increase in corporate stock purchases, and strong confidence shown by money market fund inflows.

"Flood noted that since 2023, inflows into money market funds have amounted to $1.6 trillion.

He said that stock sentiment has not yet reached bullish levels either, which is a hopeful sign that a major correction is not imminent.

Goldman Sachs strategists said in a previous report that the stock market could soar another 15% this year, which they predicted would push the S&P 500 to 6,000 by the end of the year.

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