Tom Lee Predicts Bond Yield Normalization and Crypto Surge by Year-End

Fundstrat's Tom Lee predicts that U.S. bond yields will 'normalize' within the next six months as inflation pressures ease, signaling a shift in financial conditions. In an interview with CNBC, Lee argued that yields falling below 5% would be 'really positive for risk-on' assets, including tech stocks and cryptocurrencies. He expects the Federal Reserve to soften its hawkish stance as inflation uncertainty diminishes, which should support riskier investments.

Lee remains bullish on equities, highlighting strong earnings growth. He anticipates nearly 30% growth in Q3 earnings and more than 20% upward revisions to 2027 earnings per share (EPS) estimates. Despite market gains this year, he notes that the S&P 500's multiple has actually decreased, making stocks cheaper. Lee reiterated his forecast for the S&P 500 to reach between 8,200 and 8,400 by year-end, though he acknowledged the possibility of a correction between mid-October and the midterm elections.

In the crypto space, Lee believes Bitcoin's (BTC) four-year cycle bottom is occurring now and predicts it will finish the year above $100,000. He also expects Ethereum (ETH) to reclaim its previous high of just under $5,000. Lee emphasized that crypto's resilience in Q3 suggests a 'pretty explosive' fourth quarter for stocks, as cryptocurrencies often lead market movements.

As of the latest data, Bitcoin's price edged 0.8% higher to around $85,900, while Ethereum moved 0.4% higher to about $2,700. Retail sentiment on Stocktwits improved for both assets, shifting from 'bearish' to 'neutral' over the past day.