Wall Street's biggest bull just slashed his year-end target for stocks after Trump's win

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Fundstrat Co-founder and Strategist Tom Lee cut his year-end target for the S&P 500 after Donald Trump's surprising election win.

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In a note on Wednesday, Lee, an enduring equity bull, said he lowered his target to 2,225 from 2,325. His prior target was the most bullish among equity strategists at major firms.

"We are reducing our S&P 500 YE target by 100 points to 2225 from 2325, reflecting the outcome of the election," Lee wrote to clients. "The change in YE target is a reduction to 0.75X of 2017 P/E (consensus EPS $133) and assumes a lingering "higher risk premia" into year-end. This would also represent about a 7% bounce from where markets are expected to open on Wednesday and consistent with our view that we would see a 7% rally post-Trump."

Stock futures plunged Tuesday, with S&P futures down as much as 4%, triggering a circuit breaker, as Trump gained ground over his Democratic rival Hillary Clinton. Trump and his economic positions were considered less predictable than Hillary Clinton's. Futures pared some of the losses ahead of regular trading Wednesday.

Lee said on Monday that stocks would still bounce even if Trump won, as history shows that economics matter more to the stock market than politics. Lee cited Trump's proposed corporate-tax cuts, higher infrastructure spending, as well as the endorsement he got from several Wall Street heavyweights as positives for the market.

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"We think this will ultimately be viewed by investors as a mandate for change - a Republican sweep (White House and Senate) happened in 1952 with Eisenhower (after 22 years of Democratic administrations); in 1980 with Reagan and in 2000 with Bush," Lee said.

Meanwhile, there's no reason to be concerned about an imminent recession as Trump takes office.

"Recessions in the U.S. have been created by: (i) commodity shocks; (ii) Central bank tightening due to overheated economic growth and (iii) diminishing return on capital due to excessive investment or speculation," Lee wrote.

He said the Federal Reserve will likely hold off on raising interest rates in December, as the drop in the US dollar eases financial conditions.

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