Tom Lee Maintains Bullish S&P 500 Forecast Despite Fed Rate Hikes and Rising Yields

Key Takeaways

• Tom Lee of Fundstrat maintains an S&P 500 year-end projection exceeding 8,200, citing artificial intelligence and technology sector momentum
• Yardeni Research lowered its S&P 500 forecast to 7,900 from 8,400 and increased bearish scenario probability to 30%
• The 10-year Treasury yield surpassed 5% this week, prompting Yardeni’s more cautious stance
• Lee argues the Fed’s rate increase will eliminate uncertainty and potentially ignite an equity market surge
• Historical data from Goldman Sachs shows the S&P 500 typically declines 2% within three months following initial Fed rate hikes

Market strategists on Wall Street remain divided over the S&P 500’s trajectory, with a leading optimist maintaining conviction while another major forecaster scales back projections.

TOM LEE SAYS ONE OF THE BIGGEST RALLIES OF OUR LIFETIME COULD BE STARTING

He thinks the fourth quarter could mark the beginning of a much larger move into next year:

– Lee says the S&P 500 $SPX could easily finish above 8,200 by year end– Tech is expected to do much of the… pic.twitter.com/iLAggazV7D

— Tom Lee Tracker (Not actually Tom) (@TomLeeTracker) September 16, 2026

In a recent CNBC interview, Tom Lee—chairman of Bitmine Immersion Technologies and Fundstrat’s head of technology research—projected the S&P 500 will “easily be above 8,200 by the end of the year.” His optimism stems from sustained momentum in artificial intelligence and technology equities.

Contrary to conventional wisdom, Lee suggested the Federal Reserve’s anticipated 25 basis point rate increase might benefit equity markets. His reasoning centers on the notion that executing the hike eliminates speculation about future tightening, potentially driving Treasury yields lower and restoring investor confidence to deploy capital into equities.

Lee observed that substantial cash reserves accumulated on the sidelines following recent market volatility. This dry powder stands ready to fuel a market recovery once the Fed’s monetary policy direction becomes clearer.

Regarding inflation, Lee highlighted that August headline CPI remained steady at 3.4% on a year-over-year basis. He referenced Goldman Sachs analysis identifying four transitory inflation contributors: portfolio management fees, flash memory pricing, trade tariff impacts, and energy market fluctuations. These elements collectively add approximately 1.7 percentage points to headline PCE inflation but are expected to dissipate within six months.

Yardeni Adopts More Conservative Outlook

Yardeni Research adopted a markedly different perspective. The research firm slashed its year-end S&P 500 forecast to 7,900 from 8,400, postponing the 8,400 target until mid-2027. Simultaneously, it elevated the probability of a bearish scenario from 20% to 30%.

The firm reduced the likelihood of its optimistic “Roaring 2020s” baseline scenario from 80% to 70%. The revision primarily reflected concerns about escalating Treasury yields. The 10-year U.S. Treasury yield breached 5% this week, trading at 4.988% as of this writing, while the 30-year yield stood at 5.355%.

Yardeni also adjusted its year-end forward price-to-earnings multiple assumption downward to 18.6 from 19.8, though it maintained its 2027 earnings projection for the S&P 500 at $425 per share.

Goldman Sachs Provides Historical Context

Goldman Sachs highlighted that equity markets traditionally face headwinds during the initial phase of Federal Reserve tightening cycles. Historical data shows the S&P 500 has averaged a 2% pullback during the three months following the start of previous hiking campaigns, though it typically rebounds with an average 9% gain over twelve months. The 2022 cycle represented the sole exception to this pattern.

According to Goldman’s chief U.S. equity strategist Ben Snider, the intermediate-term effect on stocks hinges on how monetary tightening influences corporate earnings growth.

Lee countered prevailing market pessimism, asserting that corporate earnings have not reached their zenith and that depressed housing investment creates opportunities for continued economic expansion. He calculates that a housing sector recovery could contribute $30 to $50 in additional S&P 500 earnings.

While Lee acknowledges the possibility of a correction later this year linked to elevated debt levels among AI companies and a crowded IPO pipeline, he contended that pervasive market skepticism itself suggests stocks have additional upside potential.

Yardeni maintained its end-of-decade S&P 500 target at 10,000.

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