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Tom Lee, the chief investment officer of Fundstrat Capital, has labeled the 2025 market “the most hated V-shaped rally,” arguing that investors are gripped by a level of pessimism typically seen only during severe bear markets, despite hopes of the S&P 500 hitting the 7,000 mark by year-end.
Lee pointed to persistent negative investor sentiment as a key anomaly in an update published on Fundstrat’s YouTube channel on Oct. 21. He highlighted recent AAII survey data showing bears outnumbering bulls, a trend that has defined the year.
“The last three times we had negative sentiment [this low] was 1990, 2008 and 2022. Those were all bear market years,” Lee said.
He contrasted this deep-seated fear with the market’s actual performance. “Investors are acting like we’re in a bear market, yet the market’s up 13% year to date,” Lee stated. “So, I would call that the most hated V-shaped rally.”
Lee is building his bullish case on a foundation of resilient corporate earnings. He noted that 84% of S&P 500 companies have beaten estimates so far this season, driven by “solidly” positive results from major banks like JPMorgan Chase & Co. (NYSE:JPM) and Goldman Sachs Group Inc. (NYSE:GS).
This combination of widespread fear and strong fundamentals, Lee argues, provides fuel for the market to move significantly higher.
In a subsequent appearance on CNBC’s Closing Bell on Oct. 22, Lee expanded on his outlook, predicting a “setup for a chase into year end” as under-invested players are forced to capitulate.
He reaffirmed his S&P 500 target, stating, “I think all of this means that the S&P can close at least at 7,000,” adding, “I actually think that’s a low number.”
Looking ahead, Lee cited “plenty [of] catalyst[s]” for the next 12 months, including an anticipated Federal Reserve easing cycle, improving “AI visibility” driving mega-cap earnings, and an eventual recovery in the ISM manufacturing index, which has been in contraction for 32 months.
On Thursday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading in a mixed manner
Meanwhile, on Wednesday, the S&P 500 index ended 0.53% lower at 6,699.40, whereas the Nasdaq 100 index fell 0.99% to 24,879.01. On the other hand, Dow Jones declined 0.71% to end at 46,590.41.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
