Steve Goldstein

Wed, Jun 18, 2025, 5:37 AM4 min read

Happy Fed Day to all who observe, and at least one widely followed analyst says there’s potential for market fireworks despite the 98.8% probability (according to futures markets) the central bank won’t move interest rates.

That analyst is none other than Tom Lee, the head of research at Fundstrat Global Advisors, whose enthusiasm for stocks generally extends to any day ending with the letter “Y.”

• ‘I’m at my wit’s end’: My niece paid off her husband’s credit card but fell behind on her taxes. How can I help her?

• Israel-Iran clash delivers a fresh shock to investors. History suggests this is the move to make.

• ‘I prepaid our mom’s rent for a year’: My sister is a millionaire and never helps our mother. How do I cut her out of her will?

• I’m 75 and have a reverse mortgage. Should I pay it off with my $200K savings — and live off Social Security instead?

• Why Tom Lee says the odds favor a stock-market rally after the Fed decision

Lee, like most everyone, isn’t expecting the Fed to cut interest rates later on Wednesday. But he does make a notable case for why the market may react positively.

“We believe the Fed will acknowledge that inflation is undershooting their expectations. Recall the Fed has argued that tariff uncertainty causes them to be on hold. But incoming inflation has been soft,” says Lee.

The consumer price index rose a scant 0.1% on a monthly basis in May. Import prices were flat. A real-time measure of import prices, updated through data last week, also has shown little pass through from tariffs to end prices.

Market-based measures have fallen to the lowest level in a year, he adds.

“So we think Fed will have to acknowledge this. And we know there is a lot of partisan bias in the inflation consumer surveys,” says Lee. “So markets likely realize Fed will have to relent eventually and return to a dovish bias.”

Lee expects the stock market to return to all-tim highs (the S&P 500 was only 3% away anyway) — he said bitcoin is a leading indicator and the cryptocurrency achievved a record last week. He still has a 6,600 target for the S&P 500 by year end.

Stock-market futures ES00 NQ00 were flipping between small gains and losses after an 0.8% retreat for the S&P 500 SPX on Tuesday. Oil CL00 edged higher.

Need to Know starts early and is updated until the opening bell, but to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

At pixel time, the U.S. military still has not joined Israel’s fight with Iran, which continued into Wednesday. Iran’s supreme leader said the country would not surrender, replying to U.S. President Donald Trump’s demand on Tuesday.