We could see some of the biggest stock market gains in our lifetime after 2026: Fundstrat's Tom Lee

[00:00:00] Tom Lee: Join us now, Tom Lee, head of research at Fundstrat and chief investment officer of Fundstrat Capital, as well as a CNBC contributor. Tom, welcome. I don't know if you heard me talking. I don't need notes to talk about you because you're on a lot. And I remember what you say. And just to sort of set the stage for what we're going to talk about, in the past, you've made some calls that people should never make, like it's going to be a good inflation number on Friday. A lot of those S&P is going to be up, you know, 8 percent this week. And a lot of times it was borne out and you've got a reputation for being fearless that way. The most recent thing that you did, which came through, and it doesn't really show it that great on that chart right there. But for the year, you were bullish and we were going along quite nicely till the war. And I remember it was almost a mini Liberation Day sell-off, not quite as bad, but pretty steep. And you said, it's already done. And by the end of this month, we're going to be significantly higher. And it was right in the midst of things hitting the fan. Not only did that happen, we took off in April, just like you said, and we've continued in May. So, I mean, you could take a complete victory lap. And we've got so many people that come on here that have no idea what the market's going to do near-term or long-term. And it's just contrasting, you know, what you do so well from time to time. You can't do it forever, though, Tom. You're going to be wrong one of these days. But you're right again this time. [00:01:34] Speaker 2: Yeah, well, yeah, thank you, Joe. I know it's been a tough market for folks. I mean, I'm not surprised. You know, we were kind of expecting 2026 to be a year where turbulence could happen and people would see head fakes. But there's still some really powerful tailwinds for America. You know, one is, of course, the AI story. And now we're learning about the energy independence, right? America can deal with high oil because we're not going to have a shortage of it. And then there's further tailwinds coming because as AI moves downstream, it's really benefiting American businesses. I think that's why S&P earnings came in for just the first quarter, $10 higher. That's $40 for the year. And if you just put a 20 multiple, that adds 800 points to the S&P. So I think there's a lot of grounding for why stocks are able to recover. So, yeah, so it's but, you know, again, I think we still might have challenges between now and December. So I think everyone still needs to be vigilant, but generally bullish. [00:02:39] Tom Lee: What did you say about the next two or two and a half years being some of the best market activity that we've ever seen? You still feel that way? And it wasn't that was not on this show. You said it somewhere else. But what is your forecast for the next two years? And what's it based on? [00:02:59] Speaker 2: Well, I think a couple of things are coming together, Joe, that are going to really support a few things that may only happen like once in our lifetime. One is I think this the U.S. economic growth rate is actually starting to step up. You know, in other words, we could grow at four percent and for a, you know, a mature, largest economy in the world to start to accelerate growth. That that's pretty astounding. The second is the U.S. is one of the biggest exporters of the most important tool in the next 10, 15 years, which is AI products. And that means we are a net essentially exporter of a high value product. And there's so much capital, I think, misallocated today because so much of it is held in private alternatives, but it's going to move into the public market. So I do think that plus the demographic tailwind of millennials and Gen Z adding to the workforce, but then also beginning to inherit generational wealth. I think that is going to set up for after 2026, perhaps, you know, like, you know, over the next two years, some of the biggest gains of the stock market in our lifetime. [00:04:10] Tom Lee: We just had a board. So you think what we hit 7,700 near term and then there's a pullback. And then after the midterms, we are is it coincident with the midterms, the pullback? And then we had higher afterwards. Was that was that? Yeah, I think that's yeah. [00:04:30] Speaker 2: I mean, this is our best guess. You know, I think June markets can still build on the gains, just not at the rate that made it. And I think it is money moving downstream. So there's going to be software rallying and beneficiaries of A.I. But between, let's say, June and October, we do have to digest potentially three major IPOs coming. And the market will try to understand Kevin Warsh's new sort of model for inflation. But I think the market always tests the new Fed. And then we have that normal seasonality around midterms. And so I think we could have a drawdown that'll feel like a bear market. And as you know, that February to April wasn't was just a nine percent decline, but it felt like a crash. And so I think markets are going to really struggle if we start to have a drawdown. And then, of course, from October, I think that's when a strong, a very strong rally starts. [00:05:25] Tom Lee: Andrew, I was going to say how bad you've been on crypto, but I don't know. [00:05:30] Speaker 3: I was going to go to a slightly different place and we could do that, too. But I was going to ask him about Mark Cuban. I don't know if you saw Mark Cuban said that he's now dumped or sold all of his Bitcoin, given that he no longer believes it's acting as a hedge against inflation or anything else, argues gold is proven to be a better bet and that Bitcoin has not acted the way it should if it's supposed to be digital gold. What say you? [00:05:59] Speaker 2: Well, you know, on the one hand, I think Mark is right. Crypto has been disappointing because crypto should move with, you know, equity markets and it should be rallying with software. Software has really started to rally big and crypto hasn't moved. So I think there are what what I call, quote, rage quitting people selling here as if something is wrong. I mean, one, I think that's what always happens at the end of crypto winter. You know, if someone asked me, is the thesis for Bitcoin or Ethereum broken, you know, it's absolutely not. Because, one, the more work we do and we're hearing it from founders like Palantir, Bitcoin and Ethereum are really the future of money because mass and compute or compute and energy, however Elon puts it, really are what's scarce and you're going to need to control agent systems. And as AI systems evolve, right, we're now talking about using commerce and operating websites. You need decentralized identity and verification. That's really what crypto does. And we know Wall Street wants to go towards tokenization. It's a vast improvement in efficiency of the of actually how money moves. And it's an innovation. Well, that only happens on Bitcoin and Ethereum and other smart contracts. So the future isn't changed. But the spotlight today is, of course, on semis, memory, starting on software. But as people focus downstream into the future, that's really, I think, when the bid comes for Bitcoin and Ethereum. [00:07:27] Tom Lee: Because when you talk about stocks, it's so easy for you. You did it. Ten dollars times four. That's, you know, $40. Put a multiple on it. That's 800 points. Why do you even try with Bitcoin or Ethereum? What's your comparable analysis to be able to come up with anything to make predictions about Bitcoin or Ethereum? There's nothing that you can base it on, Tom, except maybe psychology or sentiment or something. [00:07:57] Speaker 2: Yeah, well, there's, yeah, actually, market sentiment plays a huge role because it's sort of essentially risk premia. But there are two proven ways to value crypto. One, of course, is just network usage because wallets and activity per wallet still explain, like, even now, 87% of the rise of Bitcoin. So as long as more people use it and they're transacting it, the value of Bitcoin should go up. It's a network effect. And the second is the umbrella value of gold. You know, gold at, when it hits $5,000, if Bitcoin had the same network value as gold and gold is not as scarce as Bitcoin, that would put Bitcoin at around $2 million. So to me, I think there's still two ways to look at the value. And, of course, for Ethereum, it's been shown for every dollar of tokenized assets, you know, tokenized dollars or others, it's created $1 value for ETH, the coin. So if you believe Wall Street's going to tokenize, Ethereum's price should go up a lot.