(Bloomberg) -- The recent rally in U.S. stocks makes it unlikely they will retest the mid-March lows, according to Fundstrat Global Advisors LLC, which recommends investors buy consumer-discretionary shares.
The S&P 500 clawing back half of its losses from the mid-February record has strong historical precedent to indicate the bottom is in, Fundstrat co-founder Tom Lee wrote in a note Friday. Of the 10 declines of 30% or greater since 1929, only four retested the “final low,” he said -- and a 50% retracement of the gauge “largely eliminates” such risk. The gauge closed Friday at 2,875, up 28% from its recent low on March 23.
Lee, whose 3,450 is the most bullish S&P 500 year-end forecast among strategists tracked by Bloomberg, recommends buying “the epicenter of the crisis.” That's shares related to the consumer, as he sees confidence measures “imploding” to levels as low as those from around the Global Financial Crisis or even 1979.
“When consumer sentiment is bad, this historically is the best time to overweight consumer discretionary,” he wrote.
READ: A $1.2 Trillion Fund Says Skip Earnings Season, Buy U.S. Stocks
Lee also sees U.S. technology, health-care and financial companies benefiting from supply chains moving back to America from China, which he expects will be a trend in the aftermath of the coronavirus crisis. He expects housing, home-furnishing and financial companies to get a boost from a migration to working from home.
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