by AdvisorAnalyst Editorial Team
The S&P 500 is at an all-time high. Oil prices are elevated. The U.S. is watching a protracted geopolitical conflict unfold in real time. And yet, most investors remain unconvinced. That paradox is central to Tom Lee's market thesis — and it explains why Fundstrat's Head of Research has remained stubbornly, systematically bullish1 while the crowd has repeatedly reached for the sell button.
"A lot of investors are surprised because the US is in the midst of a war that could be a long war and oil prices are at record highs," Lee tells Meb Faber on a recent episode of The Meb Faber Show. "And I think a lot of folks at the start of this year would says that this would have been enough to trigger a bear market or even a recession. But instead the S&P's at an all time high and the groups that led last year like AI and semis are the ones leading again. So I think it really speaks to me about the resilience of the US economy and maybe the continued very weak conviction of most investors."
That weak conviction is not incidental — it is, for Lee, precisely why the bull case remains intact.
The 7,300 Call and What Comes Next
In December 2025, Fundstrat mapped the contours of 2026 and arrived at a number: 7,300 on the S&P. At the time, the index was trading in the 6,000s, making the target aspirational. The thesis was that 2026 would rhyme with 2025 — difficult at points, but ultimately strong — with markets first testing a new Federal Reserve chair before recovering.
"We penciled in the idea that the market would test a new Fed and therefore we would have a sort of start to the year that would be strong," Lee explains. "7,300 was an aspirational number at the time because the S&P was in the 6000s. But then we think that there'd be a pause and then the setup would still be positive because we think there were some structural tailwinds. And so we thought we'd end the year 2026 at 7700."
The year is tracking that script. But Lee is not declaring victory. With the market now at or above 7,300, he is clear-eyed about what has changed: stocks are no longer cheap. "Stocks were a lot cheaper at the end of March at the market lows, they're a lot less cheap now," he says. "So a lot of good news is priced in."
Two risks loom largest in his second-half calculus. First, the new Fed chair introduces policy uncertainty — historically, 11 of the 13 new Federal Reserve chairs have seen at least a 10% drawdown in their first year. Second, oil prices do not yet reflect what Lee believes will be a genuine petroleum shortage developing later in 2026. "The current price of oil doesn't seem to reflect what will be the clearing price later this year," he says, citing drawn-down inventories, supply shortages, and disrupted shipping lanes. His honest assessment: "I'm going to just put it as an unknown."
Sentiment as a Broken Instrument
One of the conversation's sharpest analytical passages concerns the University of Michigan Consumer Sentiment survey — and why Lee believes it has become structurally unreliable as a market signal.
The paradox is glaring. Markets are near record highs. Michigan sentiment is near record lows. Lee's explanation is methodological and political. Michigan's survey moved to an online-only format, producing a respondent pool that is roughly 66% Democratic versus 33% Republican — far from the actual U.S. electorate composition. That skew, compounded by what Lee calls partisan emotional overlay, is producing readings that bear little relationship to economic reality. "If someone was trying to manage money off the University of Michigan survey, both on the inflation survey which is showing chronically high inflation expectations or the sentiment they would have gotten the stock market wrong because it's giving you very bad signal," he says.
He points to an extreme data point: approximately 25% of Democratic survey respondents report that inflation is currently running above 100%. "I think it's polluted in the sense that people might just be making up numbers when they respond to that survey," Lee says.
His broader argument about positioning data reinforces the case. When the market declined recently, Goldman's prime brokerage data showed short interest increasing at the fastest pace in nearly 15 years. Markets that are near a top don't behave this way. "When markets are nearing a top, bubbles form because investors become overly confident about continued gains," Lee explains. "But that's not what we've seen. Every time I think the market falls 2 or 3%, sentiment turns pretty bearish."
The IPO Supply Shock: Turbulence With a Through-Line
Meb Faber surfaces one of the conversation's most provocative structural questions: what happens to markets when SpaceX, OpenAI, and Anthropic go public? Referencing analyst Paul Kedrosky's inflation-adjusted estimates — which suggest these three companies together could exceed the entire dot-com IPO wave from 1995 to 2000 — Faber asks whether the supply shock is a threat.
Lee's answer is nuanced. Yes, the volume of new supply is mechanically significant. "Superficially, I would say the size of the IPOs coming — SpaceX, OpenAI, Anthropic — and then the supply release 90 days later is something that we have to mechanically think about how the market absorbs all that," he says. "Let's say it's collectively 4 trillion. It's like 5, 6, 7% of the S&P 500."
But the bearish read misses a structural offset: public equity allocations among high-net-worth individuals and institutions are near record lows, with a decade of capital having flowed disproportionately into alternatives. "For every dollar that went into public markets, $9 probably went into alternatives," Lee estimates. He expects the mega-IPOs to act as a catalyst for reallocation back into public equities — with early SpaceX investors more likely to hedge and borrow against positions than liquidate and trigger tax events.
Granny Shots: Theme Intersection as Alpha Engine
Now managing $4.9 billion across two funds, Granny Shots — named after NBA Hall of Famer Rick Barry's unconventional underhanded free throw — has become one of the more distinctive ETF launches of recent years. The methodology is thematic intersection, not momentum or factor exposure. Fundstrat identifies seven major structural market themes, then selects stocks that appear in at least two simultaneously.
"We think the themes that are really important today are things like global labor shortage and AI energy and cybersecurity, plus sovereign security," Lee explains. "We look at demographics, the manufacturing cycle, monetary policy and then seasonality, among other things."
Current four-theme holdings include Nvidia, Chevron, Google, and Meta. Three-theme names include Apple, AMD, Broadcom, and American Express. Since launch in November 2024, Granny Shots has outperformed the S&P by approximately 450 basis points in its first year and roughly 180 basis points year-to-date — through three distinct market regimes. The strategy rebalances quarterly, deliberately avoiding high-frequency repositioning.
Blockchain's Banking Disruption — and the Boomer Irony
When Faber references Jeffrey Gundlach's observation that crypto has become a "boomer" asset class, Lee frames it not as an insult but as confirmation of institutional adoption reaching its logical conclusion. Wall Street's move into tokenization — enabling 24/7 trading, leverage against non-traditional assets, and programmable settlement — is real and accelerating.
But the deeper structural argument Lee makes concerns the economics of digital-native financial institutions versus incumbents. Tether, a crypto-native stablecoin issuer with approximately 300 employees, is projected to earn $15 billion this year — placing it among the eight most profitable banks in the world. Jane Street, with 3,000 employees, is on pace to earn $40 billion. JPMorgan, with 300,000 employees, earns approximately $60 billion. "What's happening with blockchain is what happened with digital media, where there were the traditional studios and then there was Netflix," Lee says.
His long-range call: "In 10 years, five of the 10 largest banks in the world will be digitally native companies."
5 Key Takeaways for Advisors and Investors
1. Weak sentiment is the bull case, not the bear case. Record-low institutional conviction, fastest short-selling pace in 15 years, and persistent bearishness at every 2-3% dip are classic hallmarks of a market that has not yet topped. Lee's framework: bubbles form when sentiment stays strong through declines. That is not today's market.
2. Discount the University of Michigan survey. Structural polling bias — an online-only format skewed 2:1 toward Democratic respondents — has made Michigan sentiment a politically distorted rather than economically informative signal. Advisors and portfolio managers relying on it as an inflation or recession indicator risk making systematically miscalibrated decisions.
3. Watch the new Fed chair carefully in H2 2026. Eleven of thirteen new Fed chairs have presided over a drawdown of at least 10% in their first year. Combined with elevated equity valuations and unresolved oil supply dynamics, the second half of 2026 carries meaningful volatility risk even within an overall constructive market structure.
4. The mega-IPO wave is a reallocation catalyst, not just a supply shock. SpaceX, OpenAI, and Anthropic coming to public markets at multi-trillion valuations will pressure short-term absorptive capacity — but may ultimately pull institutional capital back from alternatives into public equities, reversing a decade-long allocation shift.
5. Blockchain disruption of banking is not theoretical — it is already occurring. The profitability benchmarks of Tether and Jane Street relative to their headcount reveal a structural efficiency gap that incumbents cannot easily close. Advisors evaluating client allocations to digital assets should consider blockchain exposure not as speculative technology but as a claim on a structural displacement of traditional financial infrastructure.
Tom Lee is co-founder and Head of Research at Fundstrat Global Advisors. He previously served as Chief Equity Strategist at JPMorgan from 2007 to 2014. Fundstrat's Granny Shots ETF (ticker: GRNY) is available to the public. Research is accessible via fundstratdirect.com.
Footnote:
1 "Tom Lee: The Market Can Climb Higher—But Expect Turbulence | #630 - The Meb Faber Show." Meb Faber Show, 18 May. 2026,
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