Thomas Lee: Falling VIX-to-Credit Correlates With Positive Equity Flows, Be Tactical During Tightening Cycle (Favors Financials and Technology), Sees Supply/Demand Imbalances In Publicly Traded Credit

Thomas Lee, JP Morgan's Chief US Equity Strategist was on Bloomberg TV on 3/22/2010. I quoted below what he said about equities. He also thinks there are supply/demand imbalances in the publicly traded securitized credit market (demand > supply), there are opportunities in bankruptcy plays (auto parts suppliers) and believes health care legislation will create jobs. He said be "tactical on policy normalization" but financials (net interest margin) and technology usually outperform during the beginning of a tightening cycle. If you followed his advice since June 17, 2009 you would've made a lot of money. For previous posts featuring Thomas Lee click here.
"I think one of the really encouraging signs recently has been that investor flows into equities have actually turned positive. I think it's one part the data has become a lot more visible and it's harder to kind of hard argue there isn't a recovery here. I also think it has to with the fact that the volatility of equities actually has come down. With the VIX coming to low levels, I think one of the take aways for us is that when you look at past episodes a falling VIX level, especially relative credit, has really been historically correlated with positive equity flows. So I think you're starting to see equity flows supporting stock prices."