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Tom Lee, co-founder and Head of Research at Fundstrat Global Advisors, predicts a substantial market rally despite widespread investor skepticism as the S&P 500, tracked by SPDR S&P 500 (NYSE:SPY), trades within 2% of all-time highs.
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What Happened: Lee wrote on X that “This remains one of the ‘most hated’ V-shaped rallies and yet we are within 2% of all-time highs.” He cited short positioning, bear sentiment, and improving macro conditions as catalysts for a possible “face-ripper rally.”
The S&P 500, closed at 5,970.37 on Tuesday, up 0.58%, while the Nasdaq-100 gained 0.79% to 21,662.58. The benchmark index reached an all-time high of 6,152.87 in February.
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Speaking on CNBC, Lee emphasized the disconnect between market performance and investor sentiment. “You’d think that with the S&P doing well this week and a great May investors are bullish. They are not,” Lee said. “In our calls and zooms with portfolio managers many are still cautious because they see tariff risks ahead.”
Lee highlighted technical indicators supporting further upside. “Given the amount of cash on the sidelines, the fact that short interest is going up and we have a quiet week and markets are rallying, I think the risk is now of a substantial leg up rally from here,” he stated.
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Why It Matters: Regarding tariff concerns, Lee downplayed their economic impact. He estimates a 10% tariff rate would create roughly a 1% GDP effect, comparing it to oil moving from $40 to $80. “We wouldn’t say $80 oil breaks the economy anymore,” Lee noted.
