That the market is rallying with hot inflation data is a good sign, a closely followed strategist says.
What strategist Tom Lee calls “the most-hated, V-shaped rally in stocks” made another inflection point higher Tuesday. That it came after a core CPI print that at 0.32% month-over-month was actually higher than 0.29% consensus is, he argues, a sign of how robust the stock market is right now and the apparent indestructibility of trading sentiment. For him, this is a bullish signal.
While the data were “hot” versus expectation, the odds of a September cut actually increased Tuesday and now stand at 94%. Fundstrat’s head of research has a 6,600 year-end target for the S&P 500 SPX and predicts that bitcoin (BTCUSD) and Magnificent 7 stocks MAGS will remain the market lodestars.
For Lee, the locomotives for further gains in stocks are the perception gap between fears of what damage tariffs may cause versus the “bark worse than bite” reality, and the conviction that the rally is still “the most-hated”. He finds evidence for this in the $7 trillion in cash currently sidelined and recent pick-up in hedge fund short-interest.
Looking forward into 2026, Lee notes the investment outlook is much improved on February owing to greater visibility on tariff, tax and deregulation policies and the more accommodative monetary policy he expects from the Fed.
Lee also added Ethereum ETH as one of its recommended investment strategies. Ethereum of course is held by BitMine Immersion Technologies (BMNR), the company he chairs, as Lee said this cryptocurrency will be the biggest macro trade over the next ten to fifteen years.
The rationale behind the Ethereum call is that Wall Street is moving onto blockchain, encouraged by the regulatory drivers of the GENIUS Act as well as the Securities and Exchange Commission’s more permissive attitude toward crypto. The majority of stablecoins and Wall Street projects are being built on Ethereum. Fundstrat’s head of digital asset research targets $10,000 for Ethereum by the end of 2025, more than double’s Wednesday price.
Lee did say that investors can go through Ethereum ETFs and also noted that Sharplink Gaming (SBET) and Ether Machine (DYNX) own the cryptocurrency in their treasuries.
Lee cites as evidence for the embryonic stage of this development, Bank of America’s latest fund manager survey which found that only 9% of respondents owned crypto of any kind, compared to the 48% who hold gold (GC00) .
In addition to the Mag 7, bitcoin and Ethereum calls, Lee also advances industrials XLI, financials XLF and small caps IWM to benefit from these trends.
-Jules Rimmer
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