Tom Lee Forecasta S&P 500 Could Top 8,000 by Year-End

TLDR

• Tom Lee expects July to be stronger for U.S. stocks.
• SPY’s market P/E has fallen by 1.1 turns since January.
• Lee sees the S&P 500 reaching 8,000 to 8,800 by year-end.
• Citigroup raised its year-end S&P 500 target to 8,100.
• Lee warned August to October could feel like a bear market.

Fundstrat’s Tom Lee expects U.S. stocks to recover in July as valuations look more reasonable and earnings season begins.

Tom Lee Sees July Rally for Stocks

Fundstrat co-founder Tom Lee said July could bring a stronger setup for U.S. stocks after a weaker June. His view centers on the SPDR S&P 500 ETF Trust, known as SPY, which remained higher for the year despite recent monthly weakness.

SPY was up about 9.22% year to date through July 2, while its market price-to-earnings multiple had fallen from January levels. Lee said “the market’s P/E is actually lower now than it was in January by 1.1 full turn,” creating room for earnings to support another move higher.

June trading was uneven, with SPY falling about 1.95% over the previous month. The CBOE Volatility Index also rose to 19.95 on June 25 before easing to 15.56 by July 6, showing that risk appetite improved entering July.

Lee expects second-quarter earnings to beat expectations again. Stronger earnings, combined with lower valuations, could support his call for the S&P 500 to rally into year-end.

S&P 500 Target Range Reaches 8,800

Lee placed his year-end S&P 500 target range between 8,000 and 8,800. He said “8,000 would be roughly 20 times the 2026 earnings of 400,” while a higher valuation multiple could lift the index further.

His upper range depends on earnings strength and a higher price-to-earnings multiple. Lee said the market multiple could reach 22 or better, which would put the index near 8,400 to 8,800 by the end of the year.

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Other Wall Street firms have also tied their bullish outlooks to artificial intelligence spending and earnings growth. Goldman Sachs has pointed to AI investment and a stable economy as drivers for S&P 500 profits, while Citigroup raised its year-end target to 8,100.

Some analysts remain more cautious because 2026 earnings growth expectations appear high. That disagreement leaves the next earnings season as a key test for Lee’s stock market forecast.

Fund Managers May Chase July Gains

Lee also pointed to weak fund manager performance as a possible driver for July buying. He said only 23% of fund managers are beating the large-cap growth index, marking the lowest level in nearly five years.

That gap could pressure managers to buy stocks during dips if the market keeps moving higher. Institutional demand already appeared strong in late June, when SPY recorded about $24.95 billion in net inflows during a down week.

Technical traders also watched SPY for a possible golden cross, a pattern formed when a short-term moving average rises above a longer-term average. That setup can attract additional buying from trend-focused investors.

Lee’s July stock rally call therefore rests on three factors: lower valuations, possible earnings surprises, and pressure on underperforming managers to catch up.

August to October Risks Remain

Lee’s bullish July view came with a warning for later in the year. He said the market could face “something that might feel like a bear market” between August and October.

He linked that risk to two possible pressures. The market may test the next Federal Reserve chair’s inflation stance, while a gradual SpaceX share unlock could also affect liquidity.

Lee compared that risk window with the February-to-April drawdown earlier in 2026. The decline was about 7%, but he said the move still felt much worse because volatility rose sharply.

Options activity also suggests investors are still buying protection. Put-spread collars on SPY and QQQ show that large investors may want upside exposure while guarding against a sharper pullback.