Fundstrat's Head of Research, Tom Lee, is advising investors to prepare for a rocky start to 2026 in both the cryptocurrency and stock markets. Lee anticipates a "painful decline" due to prevailing geopolitical tensions, tariffs, and political divisions. This correction could see a 15%-20% drop in U.S. stocks.
In a recent interview on The Master Investor Podcast with Wilfred Frost, Lee outlined his expectations for the year. While the beginning of the year may bring challenges, Lee predicts a strong rebound towards the end of 2026. This recovery is expected to be fueled by a more dovish stance from the Federal Reserve and the cessation of quantitative tightening.
Despite the anticipated early-year downturn, Lee remains optimistic about the overall market trend. He expressed this positive outlook in a CNBC interview, noting that the recent market uptick is a promising sign for the year, potentially driving the S\&P 500 index to 7,700 points. Lee believes that recent fluctuations in the financial, overall, and crypto markets are partly influenced by policy factors.
Lee also weighed in on Bitcoin's potential, remaining optimistic that it could reach a new all-time high this year. While he didn't reiterate his previous $250,000 Bitcoin price target, his bullish sentiment is clear. Furthermore, Lee holds an even more favorable view of Ethereum, expecting its performance to outpace that of Bitcoin.
Lee has also suggested that Bitcoin could reach $250,000 by the end of 2026, arguing that Bitcoin is becoming a long-term macro asset, and the halving schedule matters less than who's buying and why they're holding. He believes the traditional four-year cycle is breaking down, replaced by ETF-driven demand, institutional accumulation, and a macro environment turning favorable for risk assets. If this plays out, Bitcoin will follow gold's institutional adoption playbook with a lag. He anticipates that the end of quantitative tightening and pivot toward rate cuts in early 2026 will catalyze rapid rallies across risk assets.
