Lee said that when you dive deep into the inflation report, which came in above economist expectations by a hair, it shows continued disinflation progress. That suggests to Lee that the stock market decline is another buyable dip, like it was after the December, January, and February CPI reports.
"Would you believe that this was actually a very good CPI report? I think there's a single chart that would explain it," Lee said in a video to clients on Wednesday. "Believe it or not, this was actually a very good CPI report. And I think that's why the stocks, which sold off today, will ultimately get bought."
That chart, shown below, highlights that more underlying components of the CPI report are starting to see inflation return to its long-term trend of less than 3%.
"The forces of disinflation are really strong because we had the highest percentage of components with less than 3% year-over-year inflation, so in other words, there's more things growing closer to trend than less," Lee explained.
"This hotter CPI number was due to auto insurance, almost solely. So, it just tells you that this is a timing issue, it's not structural. In other words, nothing else is causing hotter CPI," Lee said.
Jeremy Siegel highlighted this same dynamic in an interview with CNBC on Thursday.
"The shelter and motor vehicle insurance are the two most backward looking of all the components of the consumer price index," Siegel explained. "It's verified that auto insurance premiums follow 12 to 15 months after the increases in used and new car prices."
"I don't think this entirely eliminates the possibility of a June cut," Lee told CNBC on Wednesday, adding that the Fed will have to digest three more CPI reports before its June 12 interest rate decision, and if any of those CPI reports show a return of disinflation, the Fed may be inclined to cut interest rates.
NewsletterSIMPLY PUT - where we join the dots to inform and inspire you. Sign up for a weekly brief collating many news items into one untangled thought delivered straight to your mailbox.