There's a 90% probability that the stock market has already bottomed in 2022, according to Fundstrat's Tom Lee

• There's a roughly 90% chance that the stock market has already bottomed in 2022, according to Fundstrat's Tom Lee.
• Lee thinks as long as the economy avoids a recession, the S&P 500 could surge to 5,100 in 2022.
• "This recovery in equities to close above [the] 200-day moving average generates quite a lot of positive signal," Lee said.

There's a roughly 90% chance that the stock market found its 2022 bottom on February 24 when Vladimir Putin launched Russia's attack against Ukraine.

That's according to a Friday note from Fundstrat's Tom Lee, who argues that as long as the US economy is able to avoid a recession this year, the S&P 500 could surge to 5,100 by the end of the year. That represents potential upside of 13% from current levels or a gain of 24% for any investor who bought at the low of 4,114 on February 24.

"We think lows for 2022 are in with >88% probability, [but] we still see stocks in a 'jagged' recovery in 1H2022. Full risk-on coming in 2H2022, [where the] S&P 500 can exceed 5,100 before year-end," Lee said.

Driving his bullish view is the resilience of the US stock market despite all of the ongoing macro headwinds. Those include rising inflation, ongoing supply chain issues, geopolitical tensions, rising interest rates, and an inverted yield curve.

Despite the negative headlines, the S&P 500 is only down about 5% year-to-date after falling as much as 12% earlier this month, and its recent rally off the lows decisively broke through the 200-day moving average. That's a bullish signal for the stock market, according to Lee, who pointed to historical market data showing strong forward returns during similar past events.

Since World War II, there have been 31 "key reversal" instances in which the S&P 500 fell more than 6% below its 200-day moving average and then closed back above the lagging technical indicator.

Of the 15 times when the US was not in a recession at the time of the signal, as in today, the S&P 500 was higher six months later 14 times, with a median return of 10%. The S&P 500 was higher 12 months later 100% of the time, with a median return of 17%. The last time this signal flashed was in May of 2020 and March of 2016, two periods that proved to be solid buying opportunities.

And even when a recession was already underway, the S&P 500 generated a median 12-month return of 18% with a win ratio of 69%, according to Fundstrat's analysis.

"So, this recovery in equities to close above [the] 200-day moving average generates quite a lot of positive signal," Lee said.

While gains in the stock market by year-end are likely, the S&P 500 can still move lower from current levels along the way. "There is a 'zone of rockiness' over [the] next three to four months, but the path 6-months and 12-months forward is positive," Lee said.

To take advantage of the potential upside ahead, Lee continues to recommend investors stick with US stocks, which is "the best house in a bad neighborhood."

"US still has the best companies and is the most liquid market," he said, adding that Latin American countries are also seeing solid performance thanks to their pro-commodity exposure.