Fundstrat
Fundstrat's Tom Lee: Does the bull market still have room to run?
10/21/2025, 8:11:20 PM
Economic Summary
- Earnings are currently solid and upcoming mega-cap reports are expected to sustain the rally; improved AI visibility may increase corporate spending priorities into 2026.
- The Federal Reserve is likely to enter an easing cycle with rate cuts next year, which would lower borrowing costs, ease household burdens, and support consumer spending and equity valuations.
- A VIX-driven deleveraging event occurred about ten days ago, suggesting much short-term selling may be done and could prompt a catch-up rally into year-end, potentially lifting the S&P to 7,000 or higher.
- Manufacturing has been weak with the ISM below 50 for 32 months; a rebound above 50—potentially aided by onshoring—would be an important positive catalyst for the economy.
Bullish
- Upcoming mega-cap earnings could drive the S&P toward 7,000+.
- Expected Fed easing and potential rate cuts next year support equities.
- Improving AI visibility should boost corporate spending into 2026.
- Deleveraging may have already occurred, setting up a year-end chase higher.
Bearish
- High valuations remain a concern despite earnings momentum.
- A recent VIX spike led to deleveraging and heightened short-term volatility risk.
- ISM below 50 for 32 months indicates prolonged weakness in manufacturing activity.
People mentioned
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