Midterm gridlock could clear the way for a risk-on rally, Tom Lee says

The US stock market could face a correction from mid-October through the midterm elections, but crypto and technology stocks may benefit afterwards if Democrats become more supportive of the CLARITY Act and data-center projects, Fundstrat’s Tom Lee said in an interview with CNBC. The strategist said crypto and AI stocks have stalled ahead of the midterms partly because of concerns that Democrats do not support the bill or the expansion of data centers. Lee argued that those concerns were misplaced. “Our contrarian take is that after midterms, the Democrats are going to start supporting data centers and CLARITY Act because, one, data centers are generally providing a lot of economic benefits to the community. And CLARITY Act had many Democratic supporters,” he said. “I think the AI stocks are going to benefit post-midterms because the change in Congress is actually going to sort of greenlight some projects.” Lee also expects the macroeconomic backdrop to become more supportive for risk assets. The latest jobs report has weakened the case for the maximum-hawkish Fed scenario that markets had been pricing in, which included three potential rate hikes and a 75% probability of an Octobe...