Tom Lee Says S&P 500 Will Hit 7,000 By Mid-2025 By Investing.com

Tom Lee, founder and head of research at Fundstrat Global Advisors, predicts continued growth in U.S. stocks in the first half of 2025, followed by a relaxation later in the year.

According to a note released by Lee, he expects the number to rise to 7,000 by mid-2025, indicating a potential 16% increase from Tuesday’s close.

However, Lee predicts a subsequent pullback to 6,600 by the end of 2025, which would still represent roughly a 9% gain from current levels.

Lee’s analysis is based on historical patterns observed after consecutive years of more than 20% returns on US stocks. He suggests that the philosophy of holding cash as a strategic asset may be waning, with investors moving capital out of cash and bonds and into stocks.

He noted that after such consecutive annual gains, with five cases recorded since 1871, the stock market usually weakens in the second half of the third year, as seen in four of the five precedents. An exception to this trend occurred in 1996 during the dot-com boom.

The S&P 500 experienced a strong performance, climbing nearly 27% in 2024 after climbing 24% in 2023.

The strategist attributes the expected gains in U.S. stocks in part to the Federal Reserve’s supportive stance as inflationary pressures ease. Moreover, he cites the new administration’s policies under President-elect Donald Trump as a factor likely to boost investor confidence and boost corporate earnings.

Lee also points to potential downside risks, such as the possibility that Elon Musk’s Department of Government Efficiency (DOGE) could be overly efficient, potentially reducing GDP due to spending cuts.

In terms of investment strategy, Lee’s top picks include small-cap stocks, financials, industrials and related companies.