The Fed will help drive a 10% gain for stocks in 2026, says one of Wall Street’s most accurate forecasters, Tom Lee

Market Outlook - Fundstrat's Tom Lee predicts the S&P 500 will reach 7,700 by the end of 2026, with the most optimistic forecast being 8,100 from Oppenheimer [2] - Lee believes the bull market is "alive" and expects a 10% gain in 2026, driven by a new Federal Reserve that will not want to hinder market growth [3][4] Historical Context - Historically, after three consecutive years of gains exceeding 20%, the S&P 500 has averaged a 12% increase in the fourth year, suggesting potential for continued growth [4] - Lee anticipates a similar trajectory for 2026 as seen in 2025, with volatility followed by a year-end rally [4] Investor Concerns - Key concerns for investors include AI valuations, adjustments to a new Fed chair, social unrest, and potential Supreme Court decisions on U.S. tariffs [5] - Despite these worries, markets have not yet priced in a dovish Fed for the upcoming year, which could serve as a positive factor for stocks [5] Sector Analysis - Lee identifies AI and energy infrastructure as major drivers of earnings and growth, along with blockchain developments and on-shoring [6] - Preferred sectors for 2026 include technology (AI, bitcoin, Ethereum), basic materials, energy, and financials, with a shift to overweight on materials and energy [6] - Specific stock recommendations include Eaton, GE Vernova, Bloom Energy, Albemarle, MP Materials, and AngloGold [6]