
Fundstrat’s Tom Lee says crypto is telling investors something the wider market has missed. Speaking on CNBC, he argued that digital assets and tech stocks could not be rising if tighter money was really on the way, and predicted that Democrats will swing behind the CLARITY Act once the midterms are over.
Why crypto’s strength matters
Lee said markets had been bracing for a “maximum hawkish” Federal Reserve. Traders had priced in three rate hikes, including a 75% chance of one in October.
Last week’s softer jobs report changed that picture, in his view. He pointed to tech stocks at new highs and crypto “doing so well” as evidence. These assets “can’t do well in the face of tightening monetary conditions,” Lee said, so they are anticipating easier financial conditions ahead.
His contrarian call on the CLARITY Act
Lee said AI stocks and crypto stalled ahead of the midterms because investors assumed Democrats oppose both data centres and the CLARITY Act. He takes the opposite view and expects Democrats to start supporting both after the vote.
The crypto market structure bill failed a Senate procedural vote 49 to 50 on September 15, well short of the 60 votes it needed. Lee’s forecast suggests that setback may not be final.
Midterms as a turning point
With the midterms about four weeks away, Lee called the vote a “clearing event” and a likely risk-on signal “regardless of outcome.” A Congress controlled by Democrats would mean gridlock, he said, and markets like gridlock.
Inflation, yields and the Fed
Lee expects softer inflation readings over the next six months as one-off pressures fade, with the next report due in two weeks. That would let the Fed step back from its hawkish stance and allow bond yields to settle.
He said the 10-year Treasury yield stood at 4.75% before the Jackson Hole meeting. Anything under 5% would be read as positive for risk assets, he said, and he sees a good chance of that within six months.
S&P 500 target: up to 8,400
The S&P 500 closed back above 7,700 on Friday. Lee sees as much as 9% further upside this year, which points to 8,200 to 8,400. His reasons:
The risk he still sees
Lee has not ruled out a pullback. He said a “speed bump” could come between mid-October and the midterms. But with sentiment already negative and investors cautious, he is reluctant to call it with confidence.
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