Fundstrat Global Advisors head of research Tom Lee is betting on a powerful stock market rebound despite the S&P 500's recent stumble to 7,552—about 2.7 percent below its all-time high after four consecutive losing sessions.
Lee calls the anticipated move a "face-ripper rally," a sharp upward surge designed to surprise bearish investors and short sellers. The recent pullback, he argues, has actually strengthened conditions necessary for such a dramatic move.
Rising Treasury yields and higher oil prices have pushed investors into defensive positioning heading into September, historically the market's weakest month. But Lee sees this caution as a contrarian signal. Bull markets rarely reach their peak during widespread bearishness, he contends, and American Association of Individual Investors data shows participants remain net bearish—suggesting equities have significant room to advance.
On inflation, Lee cites Goldman Sachs data identifying four contributors to headline Personal Consumption Expenditures that collectively total 1.7 percentage points: portfolio fees, flash memory prices, tariffs, and energy costs. All four are forecast to fade within six months, potentially reducing headline PCE by 100 basis points as they roll off.
That combination—persistent investor caution, moderating inflation expectations, and oversold conditions—creates the setup Lee has predicted throughout 2026. The timing may have shifted, but the core thesis remains intact: the rally is delayed, not derailed.
Lee projects the S&P 500 rising above 8,000 before a correction to around 7,374, with a bullish stance holding through year-end. Investors dismissing the upside risk face being caught off guard when momentum shifts, he warns.
