The S&P 500 is heading toward a new high, and Bitcoin is the one showing the way. That’s what Tom Lee, head of research at Fundstrat Global Advisors, laid out during a market segment this week, where he broke down why he thinks the rebound in crypto points directly to more upside for equities. This came as investors braced for the Federal Reserve decision, while stocks pulled back slightly on Monday. Tom said the bottom was already in. He reminded viewers that he’d called 5500 for the S&P 500 weeks ago, and the market hit that without resistance. “Bitcoin is above its April 2nd level,” Tom said. “Bitcoin is telling us the S&P should recover towards the 5800 level in the near term. That’s still upside from here.” He pointed to how the crypto’s performance tends to lead risk-on sentiment, and this pattern is still intact. Tom Lee says tariff fears are fading fast Tom said that although tariff fears could resurface, the macro picture looks better now than it did in early April. He said April 7 was the peak for tariff panic and conditions since then have improved. Tom also pointed to signs from other assets that lead stocks. Credit markets, high-yield bonds, and the VIX are all signaling reduced stress. “High yield has recovered almost all the widening that happened since April 7,” he added. Tom explained that the VIX term structure is now inverted, which tells him volatility is calming down. He said that sets the stage for stocks to move higher. Looking ahead, he said 2026 offers potential confidence, especially if there’s deregulation and better comparisons for corporate earnings. If new tariff rules open the door to more exports, then earnings could get another boost. Tom wasn’t pretending the rally to new highs will be easy though. “The bar for recovering to all-time highs is of course higher,” he said, but made it clear that the current setup is favorable. “The risk reward is actually still positive here,” he added. He said the market can still go higher, even with all the noise. Tom Lee points to crypto and commodities for direction Tom said companies have proved they can handle shocks. He pointed to Covid, inflation, and even the Fed’s aggressive rate hikes. “Companies survived a bullwhip effect on the economy. They survived a surge in inflation. They survived the Fed hiking at the fastest rate ever,” he said. He expects earnings to beat forecasts again, especially if conditions stabilize. Tom listed off names that had been dragging the market down—Tesla, the Magnificent Seven, and Bitcoin—but said they’re all rebounding now. “They’ve begun to recover,” he said, before stressing again that Bitcoin is already ahead of its April 2 price and that’s the biggest clue that stocks should follow. Fundstrat’s Tom also slammed the Fed for sitting on their hands while the European Central Bank is already cutting rates. He pointed out that the ECB’s inflation measure leaves out shelter costs. If the Fed did the same, Tom said, “Core inflation here would be lower than Europe’s.” Still, US interest rates are 125 basis points tighter than the ECB, which he said makes no sense. He said it’s easy to see the argument for the Fed to start cutting now, even before the full effects of tariffs show up. But he also questioned if Trump’s pressure might have boxed Chair Jerome Powell in. If inflation drops but growth slows, Powell might get blamed. “It sets him up to possibly be the fall guy,” Tom said . Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now
