Why one firm says the failure of Silicon Valley Bank could be a positive for the stock market

• Stocks will benefit from Silicon Valley Bank's collapse, Fundstrat's Tom Lee said.
• "In other words, we think the Fed could move away from 'higher for longer' to a possible pause."
• He previously forecast the the S&P 500 rallying to 4,250 by the end of April.

The Silicon Valley Bank failure is actually good news for stocks, and the market could be set up to post double-digit gains this year, according to Fundstrat's head of research Tom Lee.

In a note on Monday, he pointed to the collapse of Silicon Valley Bank as a possible catalyst for stocks, despite roiling markets. After reporting a $1.8 billion loss on its bond portfolio, the tech-focused bank saw depositors rush to withdraw funds, causing its operations to eventually be shuttered by the FDIC. 

Experts say the bank's failure represents the latest casualty of the Fed's monetary tightening, which has hit bond prices and popped the bubble in tech stocks. But it could force the Fed to stop rate hikes, Lee said.

"In other words, we think the Fed could move away from 'higher for longer' to a possible pause," he said, adding that stocks are going to be hit in the near term by SVB aftershocks. 

His view echoes those of other analysts, with Goldman Sachs no longer foreseeing a rate hike at the next policy meeting later this month.

Meanwhile, markets overall still see an increase next week but dialed back their expectations: after previously betting on a 50-basis-point rate hike, investors are now pricing in 75% odds of a 25-basis-point increase, according to the CME FedWatch tool.

That's already had a slight a impact on the market, with all three benchmark stock indexes briefly rising Monday morning as investors braced for a softer policy move. Still, market volatility has spiked, according to the CBOE Volatility Index, and bank stocks are still reeling as the fallout of SVB ripples through the market.

Lee previously predicted the S&P 500 rising 10% to 4,250 by the end of April, and rising at least 20% by the end of the year.

He has been bullish on stocks amid cooling inflation indicators and slowing Fed rate hikes, contrary to more bearish market commentators, who have warned of an impending stock crash as firms continue to battle tighter financial conditions.