Buyers could be forgiven for feeling nervous after navigating what Fundstrat International Advisors’ head of analysis Tom Lee calls a sequence of “extinction events” during the last 4 years. Nonetheless, in line with the highest analyst, the very trauma of those current crises has suppressed the economic system and investor sentiment, making a coiled spring for a bullish 2026.
Talking on The Prof G Markets Pod, Lee argued that the market’s resilience within the face of relentless shocks is a sign of underlying power. He recognized six “extinction events” rattling the market, together with the COVID-19 pandemic, the supply-chain disaster, the quickest inflation cycle in historical past, after which the quickest sequence of Federal Reserve charge hikes in historical past. Moreover, Lee pointed to instability involving tariffs and geopolitical tensions, such because the U.S. strikes involving Iran, as occasions which have collectively “made investors very nervous about… investing in full risk, because these are, what, six black swans that happened in four years,” he stated, referring to the well-known markets idea by Nassim Nicholas Taleb.
Lee made his remarks earlier than the U.S. strike on Venezuela, yet one more instance of geopolitical tensions scrambling markets. He doubled down in a Jan. 5 look on CNBC’s Squawk Field, saying that 2026 is shaping as much as be a yr with sturdy fundamentals in markets, whereas emphasizing that the market must digest three years of annual beneficial properties over 15%.
The ‘wall of worry’ and a market correction
Nonetheless, the highway to a affluent yr could also be paved with volatility. Lee predicted a “miniature bear market” or a major drawdown, earlier than the restoration totally takes maintain. He defined that the inventory market’s three consecutive years of huge returns are a uncommon prevalence that traditionally suggests a must consolidate beneficial properties. “I think that we end up a bullish outcome despite all the skepticism,” Lee stated, noting {that a} 2026 pullback would probably be a shopping for alternative relatively than the tip of the cycle.
The third labor scarcity epoch
A key ingredient in Lee’s recipe for 2026 is the expertise sector, pushed by an enormous demographic shift. He argued the U.S. is in a long-term labor scarcity period. “We entered the third epoch, or era of labor shortage, which started in 2018 and it’s going to last to 2035,” he predicted, necessitating heavy expertise spending to switch lacking employees.
He in contrast the present AI increase to the introduction of flash-frozen meals within the Twenties, which, per Fundstrat analysis, finally lowered farm labor from 40% of the workforce to 2% whereas decreasing meals prices. In the same method, he stated he thinks AI will create effectivity relatively than financial spoil.
“Let’s say there was a CNBC in 1920 and these economists were saying, ‘frozen food, if it comes along and it’s going to wipe out 95% of all farmers, this is going to wipe out the U.S. economy. The U.S. economy can’t survive frozen food,’” Lee famous, making his level about present hysteria about AI job displacement. “Instead it freed up time, right? And it created, it allowed people to be repurposed, and it created a completely new labor force.”
Addressing fears of an AI bubble, Lee drew a parallel to the dot-com period. He identified that if an investor purchased the “internet basket” in 1999 and held it till at the moment, they’d have outperformed the S&P 500, despite the fact that a lot of the shares in that basket went to zero. Equally, Lee estimated that whereas 90% of AI shares could carry out worse than anticipated, the sector as a basket will probably outperform the broader market.
When requested instantly about his status as a “permabull,” Lee replied that he was first labeled with the time period again in 2009, and historical past proves him proper. “Here’s what’s interesting 16 years later … the optimists have won.”
Betting on resilience stays the precise play, he stated, and in case you look carefully, markets have that heading into 2026. “America, as long as it’s a place of innovation—and we are, because we’re at the center of AI—I think it’s pretty bullish,” Lee stated, whereas acknowledging the important thing level raised by the present’s hosts: “there’s a chance that this AI is a disaster for labor markets, and if it is, the U.S. will be the least scathed but everyone’s going to go down.”
