Tom Lee: S&P 500 Could Hit 7000 Despite Widespread Pessimism

Tom Lee, Fundstrat's Head of Research and a seasoned market strategist known for his often-accurate predictions, suggests the S&P 500 (SPX) could see a significant surge by the end of 2025, potentially reaching the 7000 mark. However, this optimistic outlook contrasts sharply with the prevailing mood among investors, which Lee describes as unusually pessimistic, a level of apprehension typically associated with major bear markets.

Persistent Negative Investor Sentiment

In a recent analysis released on Fundstrat's YouTube channel, Tom Lee highlighted the striking disconnect between the market's robust performance and the persistent negative sentiment among investors. He specifically pointed out that recent surveys from the American Association of Individual Investors (AAII) consistently show that bearish investors outnumber bullish ones throughout 2025. "The last three times we saw sentiment this negative was 1990, 2008, and 2022, and those were all bear market years," Lee explained. This underscores just how deeply ingrained fear is in investor decision-making.

The "Most Unloved V-Shaped Recovery"

Lee characterizes the current market rally as the "most unloved V-shaped recovery" because of the stark contrast between investor sentiment and actual market performance. Despite the S&P 500's over 13% gain year-to-date, investors remain wary, almost as if they are anticipating a major downturn.

Corporate Earnings Resilience Underpinning the Market

Tom Lee's bullish stance hinges on the belief that corporate earnings remain remarkably resilient. He noted that so far in the current earnings season, 84% of S&P 500 companies have beaten expectations, with strong positive results from major banks like JPMorgan Chase (JPM) and Goldman Sachs (GS) playing a crucial role in bolstering market confidence. Lee believes this combination of pervasive fear and strong fundamentals sets the stage for a significant market rally.

Anticipated Year-End Rush to Buy

In his appearance on CNBC, Lee elaborated that underinvested investors will be forced to pile into the market at year-end, driving a "panic bid". He reiterated his S&P 500 target, stating, "I think all these factors mean the S&P 500 is going to at least reach 7000 by the end of the year." He added that he thinks this number is still conservative.

Future Growth Catalysts

Looking ahead, Lee identified several potential catalysts for growth in the next 12 months. These include an anticipated easing cycle by the Federal Reserve, improved clarity in the outlook for Artificial Intelligence (AI) that will drive earnings growth for big tech stocks, and the eventual recovery of the Institute for Supply Management (ISM) manufacturing index, which has contracted for 32 consecutive months. It's important to note that these are projections subject to market uncertainty and should not be considered financial advice.