Episode summary
What Tom Lee's Worried About in 2026 | TCAF 227
Ask The Compound
· · 1 hr 18 min · Hosts: Michael Batnick, Josh Brown · Guests: Tom Lee
Summary
Tom Lee argues 2026 looks a lot like 2025: a strong first part of the year, a meaningful drawdown later, and then a strong recovery. He says the correction is more likely to be driven by policy shocks and the market testing a new Fed than by a true economic downturn, which would keep the broader bull market intact.
His core case is that earnings growth is improving, market breadth is widening, and the market is broadening beyond the Magnificent 7. He points to strength in energy, basic materials, gold, silver, and even international stocks as signs of a more durable advance, while noting that the biggest risks are higher valuations, consumer stress at the low end, and a buildup in margin debt.
Lee is especially focused on how capital is rotating under the surface. He sees software as vulnerable to AI disruption, expects crypto to remain pressured after a major deleveraging event, and thinks the biggest structural winners may be the infrastructure layers of digital finance, especially Ethereum and stablecoins. At the same time, he says large IPOs and broadening leadership can be bullish if they unlock wealth and diversify market participation.
Key takeaways
- Tom Lee expects 2026 to rhyme with 2025: an early-year rally, a midyear drawdown that feels like a bear market, and a strong rebound afterward.
- He says earnings growth, improving breadth, and broadening leadership are evidence the bull market is still alive, even after six major market shocks since late 2019.
- Lee thinks energy and basic materials remain attractive because they have underperformed for years and now look like accumulation trades.
- He warns that margin debt is approaching a level where forward stock returns have historically turned negative once the year-over-year gain exceeds 38%.
- He sees software as a likely AI loser, while arguing Ethereum is better positioned than Bitcoin to benefit from blockchain adoption in traditional finance.
Notable quotes
“But then we have a draw down that feels like a bare market”
“If you have a decline and it's not leading to an economic downturn, those declines are usually V-shaped and symmetrical”
“earnings growth is picking up this year. Um, not just in the US, but globally”
“the biggest bull market right now in the United States at least, maybe this is true in other places overseas, is energy stocks, gold miners”
How the episode opens
You like this weather? You're a skier, right? — I was a skier, but I had — I know you got — Two ACL surgeries. So, I'm I'm only skiing from my mind. It's an imaginary skiing now. — Yeah. Virtual. — I'm too old to have another injury.
Somebody asked me recently if I wanted to go skiing. I don't know how to ski. It's too late. I'm going to die. — No, it's not too late. — No, my body. I'm going to tear something, too. — Uh I if you like rollerblade or ice skate.
No, your instinct is right. I was at dinner with Rob Sichin in uh Florida uh like 10 days ago and he was telling us like stories of his ski injuries. Like this guy, he has beating the out of himself.
Yeah, — He's got like titanium all over his body. — He's kind of bionic. He has like a couple fake knees. — He's almost an Optimus. I told him like an Optimus robot. He was He was saying he's a mogul skier.
I'm like, "What? I know what a mogul is. What What does that mean?" He's like, "Just bumps the whole way down." Well, who the would do that? That sounds like the worst part of skiing. — Skiing attracts like some really extreme risk takers.
So he goes, "Oh, JB, I love it. I love the mogul. I ski the mogul." You know, he — Where's He isn't he from Pittsburgh. Where's that accent from? — I don't know. It's amazing. — He did. He grew up in like Pennsylvania.
But that accent is not from P. That's not a Pennsylvania accent. — He's like JB, you know, I love the Mogals.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- 2026 market outlook
- precious metals
- crypto bear market
- tesla robotics
- software correction
Companies and tickers mentioned
- TSLA
- Tesla
Watch the episode
Watch “What Tom Lee's Worried About in 2026 | TCAF 227” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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