Fundstrat Global Advisors head of research Tom Lee remains convinced that a powerful stock market rebound is on the horizon, despite a string of recent losses.
The S&P 500 has recorded four consecutive losing sessions and currently sits about 2.7% below its most recent all-time high, rattling investor confidence heading into the fall.
Lee has described the anticipated move as a potential “face-ripper rally,” a sharp upward surge that could blindside bearish investors and short sellers positioned against the market.
Rather than abandoning his bullish thesis, Lee argues that the recent pullback has actually strengthened the conditions needed for such a dramatic move to materialize.
Rising Treasury yields and higher oil prices have been the primary culprits behind the recent weakness, pushing many market participants into a defensive posture.
Concerns about September’s historically poor seasonal performance have added another layer of caution, but Lee contends that much of the bad news is already baked into current prices.
Lee pointed to investor sentiment surveys as a key pillar of his optimistic outlook, noting that American Association of Individual Investors data shows participants remain net bearish heading into the period.
He argued that it is historically rare for bull markets to peak during periods of widespread bearishness, and that the persistence of caution suggests equities may still have meaningful room to run.
On the inflation front, Lee referenced Goldman Sachs data suggesting that four separate contributors to headline PCE readings, totaling 1.7 percentage points each, are forecast to fade within six months.
Those contributors, identified as portfolio fees, flash memory prices, tariffs, and energy costs, could collectively slice headline PCE by 100 basis points as they roll off.
Lee maintained that the combination of bearish sentiment, moderating inflation expectations, and oversold conditions represents a compelling setup for the rally he has been predicting throughout 2026.
While the timing of the move has slipped, Lee’s core argument holds that the rally is delayed, not derailed, and that investors dismissing the upside risk may be caught off guard when momentum shifts.
