What does Tom Lee say about 2026? | A 2026 Market Analysis

S&P 500 Price Targets

As we move through early 2026, Tom Lee, the Head of Research at Fundstrat, has maintained a remarkably optimistic outlook for the equity markets. His primary forecast for the S&P 500 suggests the index could reach the 7,700 level before the year concludes. This prediction is rooted in the belief that the current bull market, which has shown significant resilience over the past three years, is entering its fourth year of expansion with plenty of momentum left.

Lee points out that even after several years of gains exceeding 20% annually, the fundamental drivers of the market remain intact. He often refers to the "Wall of Worry"—a collection of investor concerns regarding inflation, labor market shifts, and geopolitical tensions—as a structural tailwind. In his view, as long as there is skepticism in the market, there is room for stocks to climb higher as those worries are gradually resolved or priced in.

Drivers of Equity Growth

The primary engine behind this 7,700 target is the continued integration of artificial intelligence (AI) into the broader economy. Lee suggests that AI is no longer just a speculative trend but a core driver of corporate earnings and productivity. Additionally, the easing of monetary policy and the potential for increased merger and acquisition activity are expected to provide the necessary liquidity to push large-cap indices to these new record highs during 2026.

Bitcoin and Ethereum Forecasts

In the digital asset space, Tom Lee remains one of the most prominent bulls, recently reiterating high-conviction price targets for the leading cryptocurrencies. For Bitcoin (BTC), Lee has forecasted a price range of $200,000 to $250,000 by the end of 2026. This projection is based on the increasing adoption of Bitcoin as a "digital gold" and the structural impact of spot ETFs which have stabilized demand.

Ethereum (ETH) is also expected to see significant appreciation. Based on historical price ratios between the two largest assets, Lee suggests Ethereum could reach between $12,000 and $22,000. He views the current market environment as a "recovery" phase following previous volatility, suggesting that the infrastructure built over the last few years is finally ready to support these valuation levels.

Crypto Market Cycles

Lee describes the current state of the crypto market as emerging from a "mini winter." He advises investors to stop attempting to time the exact bottom of market cycles and instead focus on "buying the dip." For those looking to participate in these movements, WEEX spot trading offers a platform to access these assets as they trend toward Lee's predicted targets. He believes the volatility seen in early 2026 is a temporary ripple caused by fluctuations in other asset classes like precious metals, rather than a fundamental breakdown of the crypto thesis.

Small Cap Stock Potential

One of the more specific themes in Tom Lee’s 2026 outlook is the resurgence of small-cap stocks. After a period of lagging behind the "Magnificent Seven" and other tech giants, Lee believes small caps are positioned to be the "winners" of the current year. He cites several tailwinds that favor smaller companies, including improving earnings momentum and a fresh capital expenditure (capex) cycle that is lifting revenues across domestic industries.

Furthermore, the Federal Reserve's shift toward interest rate cuts has significantly eased financing pressures for smaller firms that typically carry more floating-rate debt. Combined with a trend toward deregulation and lower corporate tariffs, Lee argues that profit margins for small-cap companies are set to expand. He notes that valuations in this sector remain attractive compared to large-cap tech, providing a favorable entry point for value-oriented investors.

Market Correction and Opportunity

Despite his overall bullishness, Tom Lee has warned that 2026 will not be a straight line upward. He anticipates a significant market correction at some point during the year—potentially a pullback of 10% or more. While such a drop might feel like the start of a bear market to many participants, Lee characterizes it as a "buying opportunity" rather than a reason to exit the market.

He describes the emotional journey of 2026 as a mix of "joy, depression, and rally." This suggests that while the year-end targets are high, investors will need to navigate periods of intense volatility. Lee’s research indicates that these mid-cycle corrections are healthy and necessary to wash out excessive speculation, ultimately setting the stage for the next leg of the bull market.

Sector Preferences for 2026

Beyond technology and AI, Lee has identified several specific sectors that he expects to outperform in 2026. These include financials, energy, and materials. The rationale for these picks is linked to the broader "reflux" of the economy and the transition from a pure growth-led market to one where cyclical sectors begin to catch up.

Sector/Asset	2026 Outlook / Target	Primary Growth Driver
S&P 500	7,700	AI integration and earnings growth
Bitcoin (BTC)	$200,000 – $250,000	Institutional adoption and scarcity
Ethereum (ETH)	$12,000 – $22,000	Historical ratios and network utility
Small Caps	Outperformance	Rate cuts and margin expansion
Energy/Financials	Bullish	Cyclical recovery and M&A activity

Investment Strategy and Risk

Lee’s strategy for 2026 emphasizes staying invested despite the "Wall of Worry." He suggests that the greatest risk to investors is not a temporary correction, but being out of the market during the rapid "melt-up" phases that often characterize the later stages of a bull cycle. For those managing risk through derivatives, WEEX futures trading provides tools to hedge positions or capitalize on the volatility Lee expects throughout the year.

The core of the Fundstrat thesis is that the labor data and inflation figures that dominated headlines in previous years are becoming less relevant as the economy shifts toward an AI-driven productivity model. This shift allows for higher growth without the traditional inflationary pressures, supporting Lee’s aggressive price targets across both equities and digital assets. To begin participating in these markets, users can complete their WEEX registration to access a wide range of trading pairs and financial instruments.