There's a lot to be optimistic about in 2026, says Fundstrat's Tom Lee
Speakers
Tom Lee
— Managing Partner & Head of Research, Fundstrat
Summary
Tom Lee joins Squawk Box to outline an optimistic 2026 outlook despite expecting a sharp second-half correction. He sees the S&P 500 reaching 7,700, favors lagging sectors like energy and small caps, and remains constructive on the Mag-7, financials and crypto. Lee also forecasts Bitcoin at $200,000-$250,000 and says oil could dip to $40 without breaking energy equities.
- Tom Lee expects the S&P 500 to hit 7,700 by year-end 2026, with a 15-20% correction likely in the second half.
- He cites improving earnings, Fed cuts, a possible ISM move above 50, and broad participation as positives.
- Energy is a top sector pick; he says oil could fall to $40 but major energy equities may still do well.
- He remains positive on the Mag-7's earnings growth, financials, and small caps, which benefit from lower rates and improving growth.
- Lee forecasts Bitcoin at $200,000-$250,000 in 2026, citing institutional adoption, blockchain product buildout, government support, and a leverage reset.
- He views gold's rally as a healthy lead indicator for Bitcoin and sees low crypto adoption as a long-term growth opportunity.
- The discussion covers whether market broadening into small caps can continue and the risk of testing a new Fed.
Ideas
S&P 500 target 7,700 by 2026
Tom Lee expects the S&P 500 to reach 7,700 by the end of 2026, even with a 15-20% correction during the second half. He thinks earnings will do better than expected while the multiple compresses as other sectors re-rate and the Mag-7 tracks earnings growth.
Energy is a top 2026 pick
Tom Lee says energy is one of Fundstrat's top sector picks for 2026 because it has lagged for a long time. Even if oil falls to about $40 early in the year, he expects the big oil majors to do well and energy stocks to start discounting higher future oil prices.
Mag-7 still has good earnings growth
Tom Lee expects the Mag-7 to keep producing good earnings growth in 2026. He says the group may track its earnings growth rather than expand its multiple, which would help pull the overall market P/E down while other sectors re-rate.
Financials among 2026 optimistic groups
Tom Lee is optimistic on financials as one of the groups that could go right in 2026, alongside energy, the Mag-7, and small caps.
Small caps benefit from easing, earnings
Tom Lee says the broadening into small caps is healthy and important. Small caps made an all-time high last year, lower rates and monetary easing help them, earnings growth is improving, and merger activity could add support.
Bitcoin to $200k-$250k in 2026
Tom Lee sees Bitcoin reaching $200,000-$250,000 in 2026, which would break the usual four-year cycle. He cites the October 10 leverage reset, continued institutional adoption, Wall Street building blockchain products, U.S. government support, low crypto adoption, and gold rallies typically leading Bitcoin.
