What Tom Lee's Worried About in 2026 - The Compound and Friends Recap

Podcast: The Compound and Friends

Published: 2026-01-30

Duration: 1 hr 18 min

Guests: Tom Lee

Summary

Tom Lee anticipates a strong beginning for 2026 followed by a potential market drawdown, ultimately predicting a 10% gain. Despite challenges like AI's impact on software stocks and policy shocks, Lee remains bullish on equities.

What Happened

Tom Lee, co-founder of FundStrat Global Advisors, predicts a promising start to 2026 with a subsequent market pullback but expects a 10% overall gain. He attributes this to historical patterns where declines not leading to economic downturns are typically V-shaped and symmetrical.

Lee highlights the market's resilience despite recent shocks, including health insurance and credit card policy changes. He draws parallels to previous bear markets, noting the 20% drawdown in April as an example.

The conversation touches on the rise of traditional financial institutions building on blockchain technology. Fidelity's stablecoin launch and governmental interest in making the U.S. a crypto hub are seen as pivotal developments.

Tom Lee discusses the ongoing bull market in energy stocks, gold miners, and base metals. He cites a prediction from Tom DeMarc that gold prices could skyrocket to $8,900, supported by a significant increase in trading volumes for precious metal ETFs.

AI's impact on software stocks is a concern, with companies like Oracle and Microsoft experiencing substantial drawdowns. Lee notes that AI's ability to replace subscription services is a significant headwind for the sector.

Tesla's shift towards full autonomy and robotics is highlighted, with Elon Musk predicting humanoid robots available by 2027. These robots are seen as potential force multipliers, addressing the structural shortage of prime-age workers.

Lee emphasizes the potential wealth creation from upcoming IPOs like OpenAI and SpaceX. He draws comparisons to past market tops triggered by large IPOs, suggesting caution.

The episode ends with a discussion on the structural changes in the labor market and the investment strategies that have outperformed the broader market, such as the Granny Shots portfolio.

Key Insights

• The market is expected to gain 10% overall in 2026, despite an anticipated pullback, based on historical patterns of V-shaped recoveries following non-recessionary declines.
• Fidelity's launch of a stablecoin and the U.S. government's interest in becoming a crypto hub mark significant steps in traditional financial institutions adopting blockchain technology.
• Gold prices could potentially reach $8,900, driven by increased trading volumes in precious metal ETFs and predictions from market analysts like Tom DeMarc.
• AI's impact on software stocks presents a major challenge, with companies such as Oracle and Microsoft facing significant drawdowns due to AI's potential to replace subscription services.