Tom Lee, the head of research at Fundstrat, said that the ongoing war and increased defense spending are playing a significant role in the economy’s resilience and the continued rise of stocks.
Speaking to CNBC host Brian Sullivan at the show ‘Power Lunch’ on Monday, Lee stated that the war is “actually quite stimulative to the economy.”
He explained that, though it “sounds counterintuitive,” the increase in defense spending, potentially reaching $60 billion a month, is helping to offset the impact of rising oil prices, which are adding approximately $12 billion a month to household expenses.
‘War Is Actually Helping…’
“The war is actually helping earnings right now,” said Lee.
He acknowledged the burden of increased gasoline prices on families, especially amid ongoing inflation. However, he suggested that the additional costs, estimated at $50 to $100 per family per month, are not sufficient to damage the economy or corporate earnings.
When asked about the factors influencing the stock market, Lee identified the war as the most significant, capable of creating “tail events on both sides.” He downplayed the impact of corporate earnings and interest rates, arguing that the effects of the war are not yet fully priced into the market.
He said that over the past five years, repeated global and U.S. shocks have made markets more resilient—so instead of panicking, they are increasingly responding in a more measured way.
Lee, Cramer See Upside Despite War Risks
Lee’s views come in the wake of his earlier prediction that the S&P 500 is heading to 7,300, as reported. He had argued that stocks can rise even as the Iran war worsens and oil prices surged. His current views seem to echo this sentiment, suggesting that the war’s impact on the economy may not be as detrimental as feared.
Furthermore, Lee’s comments also align with CNBC "Mad Money" host Jim Cramer‘s predictions of potential market shifts if the U.S.-Iran war concludes. Cramer predicted that if the war ends, interest rates—particularly the 10-year Treasury—could decline as inflation fears ease. He also expects a rebound in growth stocks as investors refocus on fundamentals, along with a rally in big bank stocks as concerns over stalled Wall Street dealmaking fade.
Price Action: Over the past month, Invesco QQQ Trust (NASDAQ:QQQ) and Vanguard S&P 500 ETF (NYSE:VOO) climbed 2.85% and 2.52%, respectively.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a Benzinga edito
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