Tom Lee Sees Post-Midterm Rally for Crypto and AI Stocks

Fundstrat’s Tom Lee anticipates a potential correction in the US stock market from mid-October through the midterm elections. However, he suggests that crypto and technology stocks could see a boost afterward, particularly if Democrats become more supportive of the CLARITY Act and data-center projects. Lee argues that current concerns about Democratic opposition to these initiatives are unfounded, citing the economic benefits of data centers and prior Democratic support for the CLARITY Act.

Lee expects a shift in Congress post-midterms to greenlight projects in the AI sector, benefiting related stocks. He also forecasts a more favorable macroeconomic environment for risk assets, as the latest jobs report weakens the likelihood of aggressive Fed rate hikes. The strategist predicts that one-off inflation factors will lead to softer inflation readings over the next six months, allowing the Fed to ease its hawkish stance and bond yields to normalize below 5%.

Looking ahead, Lee projects the S&P 500 could rise as much as 9% by year-end, reaching between 8,200 and 8,400. He highlights accelerating earnings growth, with third-quarter earnings potentially hitting 30% and 2027 earnings estimates up over 20% from the start of the year.