Tom Lee Predicts ‘Joy, Depression and Rally’ for Stock Market in 2026 – Here’s His Outlook

Tom Lee says that there are more reasons to be optimistic about financial markets in 2026 than not.

In a new interview on CNBC, the head of research at Fundstrat predicts a potential choppy phase in the early part of the year, before a strong finish with markets in the green.

“Compressed into one year, it will be joy, depression and a rally. I think just like last year, 2025 we had a terrible start, people got very gloomy, then we had a nice rally to finish the year. April was the low… So I think the market will test the new Fed. That probably is the reason we have some fear this year.

But there’s a lot of things to be optimistic about. The tariffs are ‘anniversarying,’ the Fed is cutting and the ISM (Institute of Supply Management could finally turn back above 50 and that’s good news. We are pretty optimistic about some groups that have lagged like energy is one of our top sector picks this year. 

Besides the Magnificent 7, Lee also names other sectors that could potentially catch an outsized bid this year.

The Mag 7 should still keep producing good earnings growth, and then the financials and small caps. So it’s like a lot of things that could go right in the market. 

I think earnings will do even better… Other sectors are re-rating, but the Mag 7 might just track the earnings growth. So that’ll pull the overall [price to earnings] down.”

Generated Image: Midjourney