A leading stock market and crypto asset bull says investors are misreading the current pullback.
In a new CNBC interview, Fundstrat’s Tom Lee believes stocks are poised for a powerful year-end surge, despite tariff headlines, volatility spikes and increasing investor anxiety.
Lee predicts that stocks will surge in the coming months and scale a “wall of worries.”
“And I think that along with the trade tensions and, you know, the VIX (volatility index) spike is the reason investors are a little cautious. But I don’t think that’s going to change that markets still have a lot of tailwinds into year end. And part of it is AI — I think demand is accelerating there. And we know that investors are sitting on a lot of cash, and institutional investors are really having a terrible year.
Only 22% are beating the benchmark, so I think there’s a bit of a chase. And then sentiment has flipped negative, which is always a contrarian buy signal. So, you know, I think despite this mounting wall of worries, including the shutdown, I think it sets us up for a pretty good rally into theend of the year.”
Looking at historical data, Lee notes that an average fourth-quarter gain since 1950 is roughly 5%, but he sees that as the floor, not the ceiling.
“I mean, 5% is just an average fourth quarter from 1950 to 2024. But we have the Fed easing after an extended pause. So that’s 1998 and 2024. So I think that 5% might be the base case. I bet you it’s going to end up being more like 7% or 8% or even higher, possibly 10%. So I think 7,000 is the low end of what we can end the year at.”
Turning to crypto, Lee says that recent massive liquidation events are not a sign of exhaustion but a reset.
“I think there are a couple of things. One is there was a big deleveraging last week because that VIX spike and the tariff headlines triggered the biggest liquidation and deleveraging in crypto ever in history. So I think that people are still licking their wounds.
And I think that there’s also a bit of gold envy because as you know, gold has been a huge performer this year. In fact, you know, there are people waiting in line to buy gold. So I think that there is a bit of like, ‘I’d rather own gold than crypto.’
So I think this is not the top of the crypto cycle, but I think levered longs in crypto are near record lows. So I think we’re at the basement and working our way back up.”
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