Tom Lee of Fundstrat anticipates a potential market correction between mid-October and the midterm elections. Following this period, he expects crypto and technology stocks to gain momentum, provided that Democratic support for the CLARITY Act and data-center development increases.
Lee argues that current stagnation in AI and crypto assets stems from misplaced concerns regarding political opposition. He believes that post-midterm shifts in Congress will likely greenlight data-center projects due to their economic benefits, which in turn should benefit AI-related stocks.
The strategist notes that recent employment data has reduced the likelihood of aggressive Federal Reserve rate hikes, which previously included a 75% probability of an October increase. He expects inflation to soften over the next six months, allowing bond yields to normalize.
Lee predicts that bond yields falling below 5% within the next six months will act as a positive catalyst for risk assets. He forecasts the S&P 500 could rise by up to 9% by the end of the year, potentially reaching a range between 8,200 and 8,400.
Corporate performance remains a key driver, with third-quarter earnings growth potentially nearing 30%. Additionally, earnings estimates for 2027 have increased by more than 20% since the beginning of the year, signaling robust underlying financial momentum.
