One Of Wall Street's Biggest Bulls Has Suddenly Found Himself On The Wrong Side Of This Rally

Bloomberg Television

JP Morgan's Tom Lee has earned a reputation for being a perma-bull for his consistently bullish calls on the stock market.

And that bullishness has generally worked out for him. Last year, he basically nailed the trajectory of the S&P 500.

However, we were taken aback by a note Lee put out on February 22. It was titled "Stepping Aside Short-Term; Fade Strength and Look for Better Entry Point Around 1400-1450; Big Picture Constructive."

The title speaks for itself. And anyone who listened would've missed out on a rally that took the Dow Jones Industrial Average to its all-time high.

In a note released this morning, Lee revisits that call.

"Equities have since risen further, ending positive for February and up 2% so far in March," he writes. "What have we overlooked?"

He offers five points, which we paraphrase:

• Underperforming mutual fund managers are buying the dips.
• Announced share buybacks are surging.
• Dividend yields continue to be more attractive than bond yields.
• Tail risks, or the risk of a market shock, are fading.
• The Fed continues to reiterate its commitment to keep monetary policy easy.

Having said that, Lee is reiterating his short-term cautiousness.

"Are we still expecting a pause?," he asks. "Yes."

But just in case stocks continue to rise:

"What could go wrong with our view? It is possible that equities are entering a new phase in this bull market—lower volatility and steadier gains. Thus, the greatest risk to our view is to the upside— that rather than a pullback, the market simply is undergoing a rolling consolidation (laggard sectors fall to the wayside). Our big picture view remains constructive."