Fundstrat's Tom Lee expects U.S. stocks to feel like a bear market between August and October 2026, driven by four headwinds including the Fed's new direction and SpaceX's share unlock. He still sees July running strong and the S&P 500 climbing past 8,000 by year-end.
Tom Lee, Fundstrat's managing partner, told CNBC on Monday that the S&P 500 and the Nasdaq Composite could feel like a bear market between August and October. He named four triggers that could test both indexes in the second half of 2026.
The four headwinds Lee is watching
Lee pointed first to the Federal Reserve's policy direction under Kevin Warsh, citing Warsh's new framework and approach to inflation. He then flagged the SpaceX lockup: the company's staggered schedule lets eligible insiders and employees unlock their first 20% of shares right after Q2 results, expected in late July or early August.
The remaining two concerns round out his list. According to Stocktwits, Lee expects a headwind from what he called "a cumulative shortage of petroleum products". He added that margin debt is kind of high, completing the four factors he thinks could unravel into something that feels like a bear market.
Why July still looks strong
Lee stayed upbeat about the near term. He noted the S&P 500 fell 1% last month while the Nasdaq Composite dropped around 3%, leaving room for valuations to expand. The pullback fits a wider rotation: the Russell 2000 outperformed the Nasdaq Composite by 9 percentage points in the first half, its first such lead since 2006.
Lee expects Q2 earnings to surprise to the upside again, and he thinks fund managers trailing their benchmarks could buy the dip after a weak June.
The bull case into year-end
Beyond the summer wobble, Lee sees higher levels ahead. He said the S&P 500 could top 8,000 by the end of 2026 and called that a low estimate, built on a price-to-earnings multiple near 20 for fiscal 2027. A multiple of 22 or better would push the index toward 8,400, with 8,800 as the upside.
Others are more measured. Morgan Stanley strategists led by Michael Wilson see the S&P 500 ending 2026 at 8,000, about 7% above current levels after a gain of more than 9% this year.
Sources: Stocktwits, FXStreet
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