Tom Lee explains what to expect from Bitcoin, S&P 500 heading into 2026

Wall Street strategist Tom Lee believes investors should brace for another volatile year ahead.

In an interview with CNBC this week, the Fundstrat co-founder outlined his expectations for both equities and crypto, warning that policy shocks could trigger sharp corrections in stocks while Bitcoin may stage a dramatic rebound.

Despite recent turbulence, Lee insists resilience remains a defining feature of markets, and he sees opportunities for recovery even after severe drawdowns.

Here’s what lies ahead for the S&P 500 index

Lee has long pointed to the benchmark S&P 500 index reaching 7,000 level by the end of 2025 – but he acknowledged in the CNBC interview that the path has been anything but smooth.

Reflecting on 2025, he described it as “five years of history compressed into one,” citing a bear market and tariff hikes that derailed earlier forecasts.

Looking forward, the market veteran expects 2026 to echo this year’s volatility.

He warned that a “policy shock, whether it’s monetary or from the administration, could lead to a big drawdown of 20% again.”

Yet he asserted that financial markets have shown remarkable resilience – often recovering losses symmetrically – and the coming year will likely not be any different.

According to him, another steep correction would likely be followed by a rebound, underscoring the cyclical nature of recent market behaviour.

Here’s what lies ahead for Bitcoin

Crypto markets have endured their own upheaval, Lee told CNBC earlier this week

He described October’s crash as “Armageddon,” when the market experienced unprecedented liquidations, wiping out nearly two million accounts and forcing a third of market makers out of business.

Despite this, Lee remains optimistic about Bitcoin’s trajectory. He argued that while crypto has historically led risk sentiment, it is now lagging behind AI-driven momentum in equities.

Still, he believes BTC retains explosive potential, adding “it’s still very likely that Bitcoin is going to be above 100,000 for year end and maybe even print a new high.”

Lee pointed out that Bitcoin’s biggest rallies often occur in short bursts, sometimes within just ten trading days, suggesting December could deliver outsized gains.

Here’s what it means for investors heading into 2026

Lee’s outlook for 2026 is a reminder of how compressed and unpredictable market cycles have become.

For equities, he sees the possibility of another sharp 20% correction driven by policy uncertainty, but also expects recovery to follow.

For Bitcoin, he anticipates a rebound to fresh highs despite recent turmoil, highlighting its role as a barometer of risk appetite.

Whether in stocks or crypto, Lee’s message is clear: volatility may be unavoidable, but resilience remains the defining trait of modern markets.

Investors should prepare for shocks while keeping an eye on the potential for rapid recoveries.

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