Tom Lee Warns of Painful 2026 Market Drop Before Year-End Rally

Lee does, however, expect a stronger finish later in the year. The Fundstrat strategist sees a potential 15%–20% stock market correction but is still confident that easing monetary conditions and long-term tailwinds from AI and blockchain will support a recovery. Lee also believes Bitcoin can reach a new all-time high once lingering deleveraging effects fade, though metals may outperform crypto again in the near term.

Tom Lee Flags 2026 Market Pain

Tom Lee warned that both crypto and equity markets could face a sharp and “painful” decline in 2026, driven by geopolitical tensions, tariffs, and political fragmentation, before recovering strongly toward the end of the year. Speaking on The Master Investor Podcast with Wilfred Frost, the Fundstrat head of research said the year will likely resemble 2025, with long-term tailwinds from blockchain and artificial intelligence still intact, but near-term risks preventing an early sustained rally.

Lee estimates that US stocks could see a correction of around 15% to 20% this year, though he believes markets will ultimately finish 2026 on a strong note. He pointed to expectations of a more dovish US Federal Reserve and the end of quantitative tightening last year as key supports later in the cycle. He also believes that policy decisions from the White House, particularly around tariffs and industrial priorities, could shape which sectors outperform, with energy and basic materials likely to benefit.

For Bitcoin, Lee said he still expects a new all-time high in 2026, even though he did not reiterate his earlier $250,000 price target. According to Lee, a fresh record high will be an important signal that the market has fully absorbed the effects of the Oct. 10 crash. He described that event as a major drag on the market, and argued that it disrupted crypto market makers, whom he referred to as the “central bank of crypto.”

BTC’s price action over the past year (Source: CoinCodex)

Lee explained that crypto’s recent underperformance relative to gold is partly the result of these recurring deleveraging cycles, which can severely impair liquidity and confidence. Until the asset class achieves broader mainstream adoption and deeper institutional participation, he said, similar disruptions are likely to continue.

Other analysts share parts of Lee’s outlook. Benjamin Cowen, CEO of Into The Cryptoverse, said metals outperformed crypto in 2025 and are likely to do so again in 2026. However, Cowen expects metals to face a big correction later in the year, which could coincide with an even steeper decline in crypto markets.