The Cuban Missile Crisis has a lesson for today’s stock market as the next Trump tariffs could fuel a huge rebound, top Wall Street forecaster says
- The stock market's trajectory during the Cuban Missile Crisis could provide a template for how investors will respond to President Donald Trump's upcoming reciprocal tariffs, according to Fundstrat Global Advisors cofounder Tom Lee, who has a strong recent track record of stock market forecasts.
An overwhelming sense of dread has settled over investors as they brace for the next salvo of tariffs from President Donald Trump, but the Cuban Missile Crisis could offer a roadmap for a huge rebound, a top Wall Street strategist said.
Fundstrat Global Advisors cofounder Tom Lee, who has a strong recent track record of stock market forecasts, told CNBC on Friday that his clients are expecting punitive tariffs that will drive several economies into recession.
But Trump's suggestion that he will show "flexibility" with his reciprocal tariffs, which are due on April 2, could indicate a less severe approach that might set off some relief.
"This sounds like that we could actually have a positive-case scenario with these tariffs, one that's either mutually agreed upon or if it's reciprocal maybe a good deal for businesses," Lee said. "And I think it would stage set the stage for a much bigger recovery rally than we expect."
He drew a parallel between the Cuban Missile Crisis, which nearly triggered a nuclear war between the US and Soviet Union, and today's situation.
The Cold War standoff was eventually resolved by President John F. Kennedy and Soviet leader Nikita Khrushchev after they agreed to withdraw nuclear missiles from Turkey and Cuba, respectively.
Lee pointed out that the US stock market bottomed seven days into that two-week crisis in October 1962, and recouped most of its losses before the actual resolution.
"So I think that's a decent template for today," he said.
Meanwhile, top investors like Cathie Wood and others on Wall Street are warning of a recession. But Lee argued the market isn't signaling one, saying investors are more paralyzed than pessimistic, and a big stock rally after April 2 could even help stave off a downturn.
"One of the things that we have to keep in mind is this trade deal, if it's acceptable, could actually basically sort of blunt this whole issue of trade in the future," he added. "And it would actually make the US more attractive again."
Earlier this month, Lee offered a similarly bullish stock market outlook, predicting a 10%-15% jump this spring after indexes hit correction territory on fears that an escalating trade war would kill growth.
Stocks continued to drop over the next several days after his prediction, but have since mounted somewhat of a comeback.
After hitting lows on March 12, the S&P 500 and Nasdaq have both climbed about 3%. Last week also saw stocks notch their first weekly gains after four consecutive declines, helped by Fed Chair Jerome Powell’s generally dovish tone Wednesday, when the central bank kept rates steady.
"There are increasing signs of that we've actually established a tradable bottom," Lee said on Thursday.
This story was originally featured on Fortune.com