TOM LEE says "DRIVERS for INFLATION are FALLING AWAY"

Summary

In this video script, financial expert Tom Lee discusses the impact of global elections on markets, highlighting significant drops in French, Indian, and Mexican stocks due to political uncertainties. He notes that the U.S. market may be less affected by political changes. Lee also addresses inflation, suggesting it’s decreasing faster than anticipated, and analyzes its effects on markets. Additionally, the script explores the Ichimoku Cloud indicator, used for assessing stock trends, and reviews various international ETFs' performance. The session concludes with insights into the current state of cyber security ETF, hack.

Takeaways

• 📉 Global elections are impacting markets significantly, as seen with France's stocks experiencing their worst week in 2 years due to political uncertainty.
• 📈 Despite global market fluctuations, the US stock market remains resilient and is less likely to be affected by a change in political parties, according to Tom Lee.
• 💡 Tom Lee suggests that energy policy and trade policies are similar between the current and former US administrations, but differences lie in areas like energy policy, affecting sectors differently.
• 🔑 Bitcoin and energy stocks are highlighted as indicators of market sentiment towards potential political outcomes, with Tom Lee noting their performance could signal market expectations.
• 📊 There's skepticism around the recent drop in inflation rates, with over 55% of CPI components now below their pre-pandemic average, suggesting that inflationary pressures may be easing.
• 🤔 The divergence between the Dow and NASDAQ indices is concerning, with the NASDAQ reaching new highs while the Dow has declined, indicating a lack of broad market participation.
• 📊 The ichimoku indicator, a technical analysis tool, is used by Fundstrat and other financial analysts to identify trends and potential entry and exit points in the market.
• 🌐 International markets are not performing as well as the S&P 500 and NASDAQ, with many European country ETFs showing declines on the weekly charts.
• 🚫 The ichimoku indicator emphasizes avoiding long positions when the price is under the cloud or moving averages, which can prevent significant losses in a downtrend.
• ✅ The indicator's effectiveness is demonstrated through various examples, including avoiding a 41.2% decline in Hong Kong's ETF by recognizing sell signals.
• 📊 The video also discusses the importance of using technical indicators like the ichimoku for making informed trading decisions rather than relying solely on news or emotions.

Q & A

What is the main topic of discussion in the provided video script?

The main topic of discussion in the script is the impact of global elections on the stock market, with a focus on how political outcomes in various countries are influencing market trends and investor behavior.

What happened to French stocks recently as mentioned in the script?

French stocks experienced their worst week in 2 years, with all gains for the year being wiped out, due to investor concerns over the possibility of France's far-right party winning the upcoming parliamentary elections.

What was the situation with India's Nifty 50 index as discussed in the script?

India's Nifty 50 suffered its worst daily decline since the beginning of the pandemic because of concerns that Prime Minister Modi might lose his majority to a more left-leaning party. However, the market has since recovered somewhat.

What does Tom Lee believe about the potential impact of the US presidential election on the stock market?

Tom Lee believes that there is a risk of a conservative wave in the November US presidential election, but he does not consider it a risk to the markets. He suggests that the US stock market will not be flustered by a change in parties in the White House or Congress.

What are Tom Lee's views on the implications of different energy policies for energy stocks and Bitcoin?

Tom Lee thinks that if Trump wins in November, it could be bad for energy stocks because of increased drilling, but it would be good for Bitcoin. Conversely, if Biden wins, the market dynamics would remain more or less the same as they are currently.

What does the script suggest about the current state of inflation according to Tom Lee's investor note?

According to Tom Lee's investor note, inflation seems to be falling rapidly, which is a point of skepticism for some clients due to the abrupt decline from April to May. However, Lee argues that over 55% of CPI components are now below their pre-pandemic average, indicating that many drivers for inflation are falling away.

What is the significance of the ichimoku indicator mentioned in the script?

The ichimoku indicator is a technical analysis tool used to identify trends, momentum, support and resistance levels, and potential buy or sell signals. It was created in Japan in the 1930s and has been widely adopted in financial analysis.

How does the script describe the current performance of the Dow Jones Industrial Average?

The script describes the Dow Jones Industrial Average as being stagnant and not keeping up with the NASDAQ, which has been reaching record highs. The Dow is down recently, indicating a divergence in market performance.

What is the general advice given in the script for using the ichimoku indicator?

The general advice given is to use the ichimoku indicator as a filter for entering or exiting long positions in stocks or ETFs. One should not enter a long position when the price is under the cloud or under the moving averages, and it's recommended to wait for a breakout above a prior high to enter a long position.

What is the potential risk of holding positions in stocks that are under the ichimoku cloud, as mentioned in the script?

The potential risk of holding positions in stocks that are under the ichimoku cloud is significant loss. The script provides examples of countries' ETFs that experienced substantial declines after their prices dropped under the cloud, indicating a lack of momentum and negative trends.