Fundstrat Global Advisors' Tom Lee characterizes the recent weakness as "troubling." However, he's still optimistic that things will turn around.
"Equity markets globally weakened further this week with the S&P 500 down another 2% (bringing the decline from the 9/19 intraday peak of 2019 to 4.5%)," Lee wrote in a new 21-page note to clients. "While the list of 'worries' continues to mount (Euro-growth, QE ending, commodities, dollar surge, small-cap underperformance, etc.), the primary issue for investors appears to be global growth concerns (Euro-area/sanctions and implied US weakness due to small- caps and retail sales)."
He identifies four reasons why things in the world are actually looking up:
1: "Dollar strength has raised US growth concerns (primarily due to exporters), but past surges are surprisingly associated with equity gains 64% of the time."
2: "3Q14 Earnings season is actually off to a good start, with 68% of companies beating on EPS (74% of Cyclicals)."
3: "US consumers will get as much as a $10 billion boost from the 3% decline in gasoline spend in the coming quarters."
4: "Valuations improved considerably (14.9x forward PE) and case for a beta chase still intact."
Lee believes the latest selling is a blip in a bull market that could run for several years. While not his official call, he noted that the S&P 500 could hit 2,700 before the bull market ended.