Tom Lee Says Softer Inflation Could Ease Fed Stance as Tech Stocks Hit Records

Tom Lee said he expects softer inflation readings over the next six months as one-time price pressures fade, a shift he believes could give the Federal Reserve room to retreat from its hawkish stance.

Before last week’s employment report came in soft, markets were positioned for a hawkish Fed scenario that included three rate hikes and a 75% chance of an October increase, Lee said. The September inflation report was expected in two weeks from his Oct. 5 comments.

Lee said easing inflation uncertainty could help bond yields return to more normal levels. He also pointed to record highs in technology stocks and strong cryptocurrency performance as signs that markets were already pricing in easier financial conditions.

Those market signals are Lee’s interpretation of how investors are responding to the prospect of softer inflation. The September report was expected in two weeks.