Fundstrat’s Tom Lee says he is not as optimistic about 2026 as in previous years.
In a new interview on CNBC, Lee says 2026 may not look so hot, although he expects the S&P 500 to move a bit higher through the end of the year.
“Next year is a year where we have a Supreme Court that can potentially destroy rates and then a new Fed that will be tested. So I think we could have a bear market in 2026.”
Lee says he believes the S&P 500 will land around 7,000 by the end of this year and reach 7,700 by the end of next year, representing a 10% gain.
“I think there is a slowdown in what the market can do next year. But that 10%, I think, contradicts what will be a very turbulent year, similar to this year, where we had rates and kind of the Fed that became aggressive again…
We come out strong. I mean, even with a new Fed, it’s clearly divided. As we learned again yesterday, we know from what the president wants to do in terms of who he wants to appoint that the preference will be for easing.”
Lee says he expects technology stocks to go through a period of consolidation at the start of the year, with small caps and financial stocks potentially outperforming.
He says replacing Fed Chairman Jerome Powell after his term ends in May will ultimately boost markets.
“I think tech will be one group that will probably have to absorb this year’s huge gains early next year. And we know that when tech starts to stagnate, people wonder if the leadership will end and the market will fall or if this is a rotation…
The real message at the end of the year will be that the Fed is back in action. So then you have a White House put and a Fed put, which is good for stocks. But before all that happens, the Fed must confirm the new chairman.
It takes about 90 days from the time his appointment takes place to confirmation and the markets are always testing a new Fed chairman. So I think this is the period from January to October where the Fed is being tested, even though we know it’s going to be a dovish Fed and that’s where a Fed put comes from.”
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