① Wall Street tycoon Tom Lee predicts that US stocks will rise by more than 10% next year, fueled by the Federal Reserve, with the S&P 500 reaching 7700 points by the end of 2026; ② Lee believes that despite the existence of artificial intelligence... Risks include valuation and the adjustment period for the new Fed chairman, but the market has not yet fully digested the Fed's dovish stance next year, which will be a major positive factor for the stock market.
As the year draws to a close, Wall Street heavyweights are releasing a flurry of predictions for next year's market trends. Tom Lee, co-founder and head of research at Fundstrat Global Advisors, known as the "Wall Street psychologist," is no exception. He predicts that US stocks will rise by more than 10% next year, fueled by the Federal Reserve's support.
He believes the bull market remains "active" and quite strong, with the S&P 500 expected to reach 7,700 points by the end of 2026, representing a further increase of approximately 12% from current levels. However, the most optimistic forecast on Wall Street is currently 8,100 points, according to Oppenheimer Asset Management.
As one of Wall Street's most accurate forecasters and staunchest bulls, Lee advised investors to buy stocks during the pandemic downturn and accurately predicted the 2023 bull market. The final price that year was only about 30 points off his target. Reportedly, among the strategists tracked by Bloomberg, Lee's predictions were the closest, earning him the nickname "Wall Street Oracle."
Lee initially set a target price of 6600 points for 2025, which was later raised to 7000 points. And now it seems that it is very close to that.
In a recent video, he stated, "We believe that the outlook for 2026 is that market skepticism will build a high wall, but with the impetus of a 'new' Fed, we will see a gain of about 10%. The new Fed will not want to stifle the bull market."
This refers to the fact that current Federal Reserve Chairman Jerome Powell's term expires next May, meaning Trump may only have weeks left to nominate his own "Federal Reserve leader." Previously, Trump stated he had decided who would succeed Powell and would announce the nomination early next year.
Currently, investors' biggest concern is whether the US stock market can maintain its upward momentum after three consecutive years of gains exceeding 20%. However, Lee points out that since 1928, the index has averaged a 12% gain in the fourth year after three consecutive years of such increases, which he considers "quite good."
He believes that the trend in 2026 will be similar to that of 2025, with a period of volatility before a rebound begins at the end of the year. He points out that historically, after three consecutive years of gains exceeding 20%, the US stock market has generally followed a similar pattern.
Lee further explained that while investors are concerned about factors such as AI valuations, the potential adjustment period for a new Fed chairman, concerns about social unrest, and the possibility of the Supreme Court lifting US tariffs, the market has not yet fully priced in the Fed's dovish stance next year, which will be a major positive factor for the stock market.
Furthermore, in Lee's view, artificial intelligence and energy infrastructure, and Wall Street's move towards blockchain... Transformation (think of the tokenization of stocks, credit, and real estate) and the resurgence of manufacturing will be the biggest drivers of profitability and growth. .
Finally, Lee predicts that the technology sector (including artificial intelligence, Bitcoin, and Ethereum), as well as the previously severely impacted basic materials, energy, and financial sectors, will recover by 2026. He also believes that further interest rate cuts by the Federal Reserve could boost underperforming financial stocks.
(Article source: CLS)
