High-profile analyst Thomas Lee said Thursday that the Federal Reserve's pivot to a more hawkish stance represented a "risk-on roadmap" that could fuel further gains in the stock market.
As a result, the Fundstrat Global Advisors research chief told CNBC that he still thinks the S&P 500 could reach his 4,800 target by the end of the year, even with only about two weeks to go before the start of 2022.
The S&P would need a rally of about 3% from current levels to reach Lee's target.
Following its regularly scheduled policy meeting on Wednesday, the Fed left its key interest rate near zero but announced that it was doubling the rate at which it will taper its asset-purchase program.
At the same time, the central bank released updated projections for monetary policy, signaling the likelihood of three quarter-point rate hikes in 2022. This was a major shift from expectations released three months ago, which showed that half of the Fed's top officials doubted any rate increases would be necessary in 2022.
Rather than signaling an end to the accommodative policy that has helped fuel stock gains, Lee predicted that the market would cheer the Fed's decision as a sign that it was taking on a role as "inflation watcher."
The Fundstrat research chief added that the Fed's new policy stance suggests a return to normal after the uncertain period during and immediately after the pandemic.
"The rationale the Fed gave for why they changed their view on tapering plus the roadmap for potential rate hikes is an economy that's normalizing with both demand shocks fading and the supply shocks fading," he said.
Lee said he was also encouraged by the Fed's seeming willingness to watch the path of the Omicron virus and adjust policy as needed.