Fundstrat’s head of research warns that the expected public market listings of SpaceX and Claude creator Anthropic could dampen the stock market’s bullish momentum.
The News
In a new CNBC interview, Tom Lee says he believes that the S&P 500 could still soar a little higher from its Friday close of 7,580 before buying momentum becomes exhausted.
Lee says he sees three converging factors that could trigger a marketwide correction.
“Our base case for this year, which we expected to be a challenging year, and it feels like it, is that we’d rally towards 7,300 initially. Now we’re above that. I think we can get to maybe as high as 7,700. But I think then we’re going to digest a lot of things until October, and that’s a new Fed Chair. It’s the energy shock, especially shortages of petroleum products and lubricants. AutoNation talked about it.
And the third is the IPOs of SpaceX and Anthropic that when the unlocks happen, that’s a lot of extra supply. So I think that could pressure stocks in a way that feels like a bear market.”
Lee notes that after the corrective period, he believes the S&P 500 will rally, rewarding dip-buyers and long-term investors.
“But then post-midterms, I think we rally strongly, and 2027 is a year where we might see some of the best returns we’ve ever seen in our lifetime.”
What It Means for Investors
The roster of analysts and bank executives warning about a potential market correction is growing.
“Big Short” investor Steve Eisman said he dumped some of his stock holdings due to rising bond market yields. JPMorgan CEO Jamie Dimon also said the market is “exuberant,” while pointing to soaring inflation and climbing bond yields. And Morgan Stanley CIO Mike Wilson warned that the market could see its first “meaningful” correction after rallying hard from its March 30th lows.
CNN’s Fear and Greed Index shows that investor sentiment has moved from extreme fear in early April, when the S&P 500 was bottoming out, to greed as the index soars to new record highs.
Investors use market sentiment as a signal to gauge whether a trend reversal is in sight. Stocks and other risk assets tend to move in the opposite direction of crowd sentiment.
As greed drives the stock market higher, several bearish factors are conspiring to trap overexuberant investors. Since December, Lee has been warning that the market will test new Fed chair Kevin Warsh until October, signaling that stocks will either correct or consolidate during the period.
Lee also talks about the energy shock, which is aligned with Dimon’s warning that inflation could easily hit 4% this year. But one bearish trigger that stands out the most is the blockbuster IPOs of SpaceX and Anthropic.
While Lee believes that the IPOs could unleash a wealth effect, the incoming stock supply could trigger a sell-off in many areas of the market. Earlier this week, Goldman Sachs managing director John Flood said in an investor note that large mutual funds and passive index funds are already unloading some of their holdings to gear up for the mega IPOs of SpaceX, Anthropic and OpenAI.
“Investors are increasingly focused on the impact of potential large IPOs in the pipeline. Ahead of each of the four largest IPOs during the past few decades, US equity mutual funds increased their cash balances.”
It appears that the smart money is already using rallies to new all-time high levels to lock in gains and prepare for the incoming wave of IPOs. SpaceX alone is expected to raise $75 billion from a single listing, while Anthropic and OpenAI are targeting at least $50 billion. That’s $175 billion raised in three public market listings.
In comparison, the US IPO market completed 216 deals in 2025, raising a combined $47.4 billion.
Lee says the IPOs would make investors feel like the S&P 500 is in the midst of a bear market because the money will likely come from both retail and institutional investors trimming and selling their holdings to get exposure to SpaceX and others. Under such a condition, the market could lose all bullish momentum, even to the point where people might panic if a bearish narrative takes hold.
All in all, the massive liquidity drain, along with rising inflation, climbing bond yields, and a testing period for a new Fed chair, appear to be conspiring to take the wind out of the market’s sails. If Lee is correct, the climb to his 7,700 target could allow investors to prepare for his predicted market pullback.
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