Fundstrat Head of Research Tom Lee said he sees an upside case for the broad-based S&P 500 to reach 6,600 points by year-end, representing a gain of 6.9% from Friday’s record close. This reaffirms the year-end target from December that he set in his “2025 Year Ahead” outlook.
“Visibility is better, tariffs aren’t as bad as expected, and the inflation impact has been very muted,” Lee said on CNBC’s Squawk Box with Becky Quick and Andrew Ross Sorkin on Monday.
Stocks posted a “waterfall decline” in April due to tariffs uncertainty. But Lee knew they were making a decisive low as Wall Street’s fear gauge VIX rose above 60 and then fell below 30. Now the S&P 500 is on course to add over 10% this quarter, while the Nasdaq Composite is poised to increase 17%.
Lee believes there’s room for the rally to continue, even though there are worries about the Big Beautiful Bill’s impact on the U.S.’s ballooning debt budget. He added that the market’s reaction in recent weeks makes it seem like investors don’t view the sustainability question “purely as its budget.”
“There’s a lot of hidden value on the U.S. balance sheet from the natural resources to the buildings they own, and gold is undervalued,” he added. “And in a way, when people say the U.S. can’t find buyers of its Treasuries, it’s actually finding it—it’s going to be stablecoins.”
He said that stablecoins will replace any foreign holders of Treasuries. They’re currently worth $250 billion, whereas the dollar’s circulating supply is at nearly $10 trillion, so there’s opportunity for it to grow. A lot of stablecoin transactions happen outside the U.S., so dollar dominance can be much higher in that scenario, he added.
“For whatever reason, we’re not at the level yet where debt sustainability’s a question,” he said.
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