The S&P 500 is heading towards a brand new excessive, and Bitcoin is the one exhibiting the best way. That’s what Tom Lee, head of analysis at Fundstrat International Advisors, laid out throughout a market phase this week, the place he broke down why he thinks the rebound in crypto factors on to extra upside for equities.
This got here as buyers braced for the Federal Reserve determination, whereas shares pulled again barely on Monday. Tom mentioned the underside was already in. He reminded viewers that he’d known as 5500 for the S&P 500 weeks in the past, and the market hit that with out resistance.
“Bitcoin is above its April 2nd stage,” Tom mentioned. “Bitcoin is telling us the S&P ought to recuperate in direction of the 5800 stage within the close to time period. That’s nonetheless upside from right here.” He pointed to how the crypto’s efficiency tends to guide risk-on sentiment, and this sample remains to be intact.
Tom Lee says tariff fears are fading quick
Tom mentioned that though tariff fears might resurface, the macro image appears higher now than it did in early April. He mentioned April 7 was the height for tariff panic and circumstances since then have improved. Tom additionally pointed to indicators from different belongings that lead shares.
Credit score markets, high-yield bonds, and the VIX are all signaling lowered stress. “Excessive yield has recovered virtually all of the widening that occurred since April 7,” he added.
Tom defined that the VIX time period construction is now inverted, which tells him volatility is calming down. He mentioned that units the stage for shares to maneuver larger.
Trying forward, he mentioned 2026 presents potential confidence, particularly if there’s deregulation and higher comparisons for company earnings. If new tariff guidelines open the door to extra exports, then earnings might get one other enhance.
Tom wasn’t pretending the rally to new highs shall be simple although. “The bar for recovering to all-time highs is in fact larger,” he mentioned, however made it clear that the present setup is favorable. “The chance reward is definitely nonetheless optimistic right here,” he added. He mentioned the market can nonetheless go larger, even with all of the noise.
Tom Lee factors to crypto and commodities for path
Tom mentioned firms have proved they will deal with shocks. He pointed to Covid, inflation, and even the Fed’s aggressive fee hikes. “Firms survived a bullwhip impact on the financial system. They survived a surge in inflation. They survived the Fed climbing on the quickest fee ever,” he mentioned. He expects earnings to beat forecasts once more, particularly if circumstances stabilize.
Tom listed off names that had been dragging the market down—Tesla, the Magnificent Seven, and Bitcoin—however mentioned they’re all rebounding now. “They’ve begun to recuperate,” he mentioned, earlier than stressing once more that Bitcoin is already forward of its April 2 worth and that’s the largest clue that shares ought to comply with.
Fundstrat’s Tom additionally slammed the Fed for sitting on their palms whereas the European Central Financial institution is already slicing charges. He identified that the ECB’s inflation measure leaves out shelter prices. If the Fed did the identical, Tom mentioned, “Core inflation right here could be decrease than Europe’s.” Nonetheless, US rates of interest are 125 foundation factors tighter than the ECB, which he mentioned is unnecessary.
He mentioned it’s simple to see the argument for the Fed to begin slicing now, even earlier than the complete results of tariffs present up. However he additionally questioned if Trump’s stress may need boxed Chair Jerome Powell in. If inflation drops however development slows, Powell would possibly get blamed. “It units him as much as probably be the autumn man,” Tom mentioned.
