Fundstrat analyst Tom Lee is positioning against prevailing market concerns about a September downturn, arguing that widespread fear of weakness could trigger a rally instead.
Lee points to historical precedent for September concerns. Across 10 U.S. midterm election years since 1986, the average stock market low occurred on September 2, following an average decline of 16.77% from the prior high.
The current environment combines seasonal weakness patterns with monetary policy uncertainty. Three Federal Reserve presidents voted for a rate hike in July rather than a cut, and Fed Chair Kevin Warsh emphasized inflation concerns at his Jackson Hole speech. Six-month PCE inflation stood at 4.1%, while the 30-year Treasury yield remained above 5%.
Lee expects the September 15 Federal Reserve meeting to determine market direction. His base case is that policymakers will neither hike nor cut rates. "If the Fed doesn't cut, doesn't hike, which is our base case, I think actually the markets could rally very strongly," he said in a CNBC interview.
Lee previously anticipated a roughly 10% equity pullback driven by weak seasonality and concerns about AI data center investments. Under his contrarian scenario, any pullback could begin above 8,000 on the S&P 500, with potential lows near 7,300.
For Bitcoin, Lee identifies four catalysts for potential strength in the final quarter: crypto's outperformance of other macro assets in the third quarter, the completion of the four-year crypto cycle, Korean traders rotating from AI stocks, and potential passage of the CLARITY Act, which would clarify regulatory oversight of digital assets.
Bitcoin traded near $78,875, approximately 37% below its October 2025 record. Lee characterizes the past year as a shallow crypto winter driven by forced selling rather than fundamental weakness, noting that few investors currently hold crypto. Rising institutional inflows into crypto ETFs support his thesis of positioning for a strong quarter ahead.
Lee's price targets include Bitcoin reaching $150,000—representing approximately a 1.9 times gain—alongside an S&P 500 above 8,200, contingent on continued rising earnings estimates.
