Fundstrat's Tom Lee Predicts Small Caps Could Surge 50% in 2023 As Inflation Fades and Fed Cuts Rates
• Tom Lee of Fundstrat predicted the S&P 500 would surge nearly 25% in 2022 when others were bearish; the index is up 23% and near his target
• After the rally, some worry valuations are too high, but Lee believes small caps could surge 50% in the next 12 months
• As inflation fades in 2024, Fed interest rate cuts should particularly benefit small caps hurt most by rising rates
• Lee sees inflation hitting the Fed's 2% target in 2023 based on falling consumer expectations and housing/car prices
• Small caps look attractive relative to book value, much cheaper than the S&P 500, like in 1999 before a 12-year outperformance run