Fundstrat’s Lee Sees Painful Market Decline to Start 2026

Fundstrat head of analysis Tom Lee has warned traders to brace for a “painful decline” throughout the crypto and inventory markets in 2026 amid geopolitical pressure, earlier than a restoration in the direction of the top of the 12 months.

In an interview on Tuesday on The Grasp Investor Podcast with Wilfred Frost, Lee mentioned 2026 will mirror 2025 with tailwinds for the blockchain and AI industries, however mentioned dangers from tariffs and political divides would maintain the market again from a sustained rally initially.

Lee estimated a inventory market correction of 15% to twenty% this 12 months, however mentioned: “I feel we actually end the 12 months sturdy,” partially resulting from a extra dovish US Federal Reserve and the conclusion of quantitative tightening final 12 months.

He additionally mentioned the White Home choosing “winners and losers” may additionally affect which sectors outperform this 12 months.

On Bitcoin (BTC), Lee mentioned he nonetheless expects it to set a brand new all-time excessive this 12 months, however didn’t point out the $250,000 Bitcoin value prediction he made in earlier months.

Deleveraging has damage the crypto market, says Lee

Lee mentioned a brand new Bitcoin all-time excessive can be a key milestone as it will point out the market has absolutely shaken off the Oct. 10 market crash, which noticed round $20 billion value of leveraged crypto positions worn out:

“I feel 2026 will likely be a very vital check as a result of if Bitcoin makes a brand new all time excessive, we all know that that deleveraging occasion is behind us.”

Lee famous that crypto’s latest divergence from gold was partly resulting from these deleveraging cycles, which periodically shake the market and severely impair market makers, who Lee described because the “central financial institution of crypto.”