MW The Fed will help drive a 10% gain for stocks in 2026, says one of Wall Street's most accurate forecasters, Tom Lee
By Barbara Kollmeyer
Lee also says 2026 will break a four-year historical rout for crypto
Look to the Fed to help stocks climb higher in 2026, says Fundstrat's Tom Lee.
Thursday could be telling in whether investors can look past AI spending worries fueled by Oracle, or focus on the Fed's last rate cut of the year.
The optimists looking for cheer may find it in our call of the day from Fundstrat Global Advisors' co-founder Tom Lee, who says the bull market is "alive" and fairly well, targeting the S&P 500 SPX at 7,700 by end 2026. Note, the most optimistic forecast for now remains Oppenheimer's 8,100 prediction.
One of Wall Street's most accurate forecasters and biggest bulls, Lee advised investors to buy stocks during pandemic lows and nailed the 2023 bull market. For 2025, Lee initially had forecast 6,600 finish before increasing to 7,000.
"We think the way to look at 2026 is there's a wall of skepticism and a new Fed and that gets us roughly to a 10% gain," he said in a video update, adding that a new Fed won't want to kill the bull market.
At the top of that wall of worry are investor concerns that stocks can't follow three years of back-to-back gains of 20% or more with even more gains. But Lee said that since 1928, the index has gained an average 12% in the fourth year following those three years, which he said would be "pretty good."
He sees a path for 2026 similar to 2025, with periods of volatility until a year-end rally kicks in. He said that is also how things have played out historically in cases of three back-to-back years of 20%-plus gains.
AI valuations, a possible adjustment time that may be needed to used to a new Fed chair, fears of social unrest and the likelihood that the Supreme Court will strike down U.S. tariffs are also on that a wall of worry for investors, Lee said.
But markets are also yet to price in a dovish Fed for next year, another tailwind for stocks.
The biggest drivers of earnings and growth in Lee's opinion will be AI and energy infrastructure, Wall Street moving onto the blockchain - think tokenization of equities, credit and real estate - and on-shoring.
Lee's favorite sectors headed into 2026 are technology, including AI, bitcoin and Ethereum, plus beaten down basic materials, energy and financials. (Lee is chairman of Ethereum treasury company BitMine Immersion Technologies (BMNR).)
Fundstrat has shifted to overweight from neutral on materials and energy, and dropped to neutral from overweight on consumer discretionary. Eaton $(ETN)$, GE Vernova (GEV), Bloom Energy $(BE)$, Albemarle $(ALB)$, MP Materials (MP) and AngloGold (AU) are among their stock ideas for the sectors they like.
He thinks more Fed cuts could boost underperfoming financials, with . American Express $(AXP)$, Bank of New York Mellon $(BK)$, Robinhood (HOOD) and Ally Financial $(ALLY)$ among names they like.
As for crypto, he thinks 2026 will break a four-year historical cycle for bitcoin (BTCUSD) that has ended in down years for the No. 1 digital asset.
First, crypto has seen a ton of positive milestones this year, while bitcoin tops are also closely correlated with tops for the ISM manufacturing index, which has been under 50 for three years and nowhere near a fresh high. He said bitcoin tops also correlate tightly with copper peaks against gold, and sees no sign of that happening either.
The markets
U.S. stock futures (ES00) (NQ00), particularly in tech, are sliding. Treasury yields BX:TMUBMUSD10Y are slipping, and bitcoin (BTCUSD) is down, while silver (SI00) steams ahead.
Key asset performance Last 5d 1m YTD 1y S&P 500 6886.68 0.43% 2.21% 17.09% 13.81% Nasdaq Composite 23,654.16 0.63% 3.43% 22.49% 18.85% 10-year Treasury 4.135 3.30 0.90 -44.10 -19.90 Gold 4243.3 0.13% 1.65% 60.77% 56.86% Oil 57.87 -3.08% -1.25% -19.48% -17.34% Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Oracle shares $(ORCL)$ are down 10% after the software and cloud company's revenue disappointed and capex on AI was higher than analysts expected.
Synopsys $(SNPS)$ is up 6% after the tech group's forecast-beating results and outlook. Adobe $(ADBE)$ posted an AI-driven earnings beat, but the software group's shares are slipping.
Lululemon (LULU), Broadcom $(AVGO)$ and Costco $(COST)$ will report results after the close.
Weekly jobless claims and the U.S. trade deficit are due at 8:30 a.m.
A cryptocurrency exchange founded by Cameron and Tyler Winklevoss $(GEMI)$ is getting into prediction markets.
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The chart
Cisco shares $(CSCO)$ have finally recovered from the dot-com bust, closing at $80.25 per share on Wednesday, the first record high since March 27, 2000. Shares of the networking hardware company have been climbing this year on demand for AI infrastructure. The stock's 35.5% gain through Dec. 10 is its best year-to-date performance since 2009, when it climbed 46.87% over the same period, according to Dow Jones Market Data.
Top tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
Ticker Security name NVDA Nvidia TSLA Tesla ORCL Oracle GME GameStop TSM Taiwan Semiconductor Manufacturing PLTR Palantir Technologies AAPL Apple AMD Advanced Micro Devices NFLX Netflix META Meta
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-Barbara Kollmeyer
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(END) Dow Jones Newswires
December 11, 2025 07:08 ET (12:08 GMT)
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