Investors can be forgiven for feeling nervous after navigating what Fundstrat Global Advisors\u2019 head of research Tom Lee calls a series of \u201cextinction events\u201d over the last four years. However, according to the top analyst, the very trauma of these recent crises has suppressed the economy and investor sentiment, creating a coiled spring for a bullish 2026.<\/p>\n
Speaking on The Prof G Markets Pod<\/a>, Lee argued that the market\u2019s resilience in the face of relentless shocks is a signal of underlying strength. He identified six \u201cextinction events\u201d rattling the market, including the COVID-19 pandemic, the supply-chain crisis, the fastest inflation cycle in history, and then the fastest series of Federal Reserve rate hikes in history. Additionally, Lee pointed to instability involving tariffs and geopolitical tensions, such as the U.S. strikes involving Iran, as events that have collectively \u201cmade investors very nervous about\u2026 investing in full risk, because these are, what, six black swans that happened in four years,\u201d he said, referring to the famous markets theory by Nassim Nicholas Taleb.<\/p>\n Lee made his remarks before the U.S. strike on Venezuela, yet another example of geopolitical tensions scrambling markets. He doubled down in a Jan. 5 appearance on CNBC\u2019s Squawk Box<\/a>, saying that 2026 is shaping up to be a year with strong fundamentals in markets, while emphasizing that the market needs to digest<\/a> three years of annual gains over 15%.<\/p>\n The \u2018wall of worry\u2019 and a market correction<\/strong><\/p>\n Lee talked to podcast hosts Ed Elson and Scott Galloway about his philosophy. \u201cMarkets climb a wall of worry,\u201d he said, arguing that they \u201cdon\u2019t peak when people are bearish,\u201d but rather when euphoria takes over and prices no longer respond to good news. Currently, skepticism remains high, which Lee views as a contrarian buy signal.<\/p>\n However, the road to a prosperous year may be paved with volatility. Lee predicted a \u201cminiature bear market\u201d or a significant drawdown, before the recovery fully takes hold. He explained that the stock market\u2019s three consecutive years of big returns are a rare occurrence that historically suggests a need to consolidate gains. \u201cI think that we end up a bullish outcome despite all the skepticism,\u201d Lee said, noting that a 2026 pullback would likely be a buying opportunity rather than the end of the cycle.<\/p>\n The third labor shortage epoch<\/strong><\/p>\n A key ingredient in Lee\u2019s recipe for 2026 is the technology sector, driven by a massive demographic shift. He argued the U.S. is in a long-term labor shortage era. \u201cWe entered the third epoch, or era of labor shortage, which started in 2018 and it\u2019s going to last to 2035,\u201d he predicted, necessitating heavy technology spending to replace missing workers. <\/p>\n