• Tom Lee of Fundstrat projects the S&P 500 could reach 7,700 by 2026, extending the bull market.
  • He cites AI-driven tech gains, a dovish Fed, and the 'wall of worry' effect as key tailwinds.
  • Lee favors sectors like tech, AI, crypto, materials, energy, and financials for future outperformance.

Tom Lee, head of research at Fundstrat Global Advisors, is making waves with his latest bullish call: the S&P 500 could climb to around 7,700 by 2026. This forecast builds on his current target of 7,000–7,300 for the end of 2025, suggesting the post-2022 rally has legs well into the next two years. In a recent CNBC appearance, Lee reiterated his optimistic stance, pointing to strong earnings, falling inflation, and AI-driven productivity gains as pillars supporting significantly higher equity levels.

Lee's outlook hinges on what he calls the 'wall of worry'—persistent investor skepticism even as prices rise—which he believes can fuel further gains as doubters eventually capitulate. He highlights AI and technology as major profit drivers and margin expanders, noting that in the current year, the S&P 500 is up about 17%, with Communication Services and Technology sectors surging 33% and 27%, respectively. According to people familiar with his research, Lee argues inflation is falling faster than consensus expects, citing alternative measures and a rising share of CPI components that are deflating. This, he says, paves the way for Federal Reserve rate cuts and easier monetary policy, which would bolster risk assets.

Fundstrat, an independent market strategy and research firm, emphasizes AI, crypto, financials, energy, and materials as preferred sectors going into 2025–2026. Lee notes that materials and energy have lagged this year, while financials climbed 11.2%, presenting potential opportunities. He expects profit margins to keep increasing, partly due to AI-driven efficiency and corporate pricing power, even amid tariffs and cost pressures. Efforts to reach Fundstrat for additional comment were not immediately successful, but sources close to the firm say Lee's projections are based on proprietary models that factor in ongoing disinflation and tech-led growth.

Without a dovish shift from the Fed, Lee's targets could face headwinds, but he remains confident in the trajectory. Other strategists are more cautious on valuations and macro risks, making his 7,700 call one of the more optimistic in the forecast spectrum. As markets digest this outlook, investors are weighing whether to chase the rally or brace for potential volatility. Lee's track record of aggressive upside targets during periods of skepticism adds weight to his latest prediction, though it remains to be seen if the bull market can sustain its momentum into 2026.

*Correction: An earlier version misstated the S&P 500's current year gain; it is approximately 17%, not 20%.