A level of surprise coming in April, says investor Tom Lee

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A level of surprise coming in April, says investor Tom Lee

Tom Lee said Monday he expects the stock market's strong start to April to continue throughout the month as part of what he has previously dubbed a face-ripping rally.

The co-founder of Fundstrat Global Advisors made his case in an interview on CNBC's Fast Money, following the S& P 500's 1.4% gain Monday to score a record close of 4,077.91.

From the beginning of the year, institutions raised almost$ 200 billion of cash, so they 've been very cautious, and they 've been nibbling or selling their tech and growth holdings, but they only started to nibble on the epicenter stocks, said Lee, whose firm considers these companies to be companies that were among the hardest hit in the pandemic but stand to gain from the economic recovery.

So, I think there's a level of surprise on April because we already had a strong finish on Wednesday last week. It is really three days of strong rallies and history shows this is really building up to be what could potentially be S& P 4,200 before the end of the month, Lee said.

The broad equity index at the level reached would correspond with around 3% of the upside from Monday's close.

Lee also said that it would make the April rally something that is both really strong but, more importantly, quite a big surprise for institutions.

As for what happens after a so-called Faceripper rally, Lee said there could be a period of choppy trading.

If the S& P does in fact rally strongly this month at a time when institutions are sitting on so much cash and there is so much skepticism on this market, we could see a big chase and that could mark the high for the year, said he. I would not say that's the basis case, but yes, we would have to consolidate these gains.

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