Tom Lee: Market Misjudging Tariff Impact – Dip Is a Buy

• Tom Lee views the narrowing scope of tariffs as a net positive for stocks, bringing the U.S. closer to a resolution that improves the equity risk-reward profile compared to February 2025.
• He anticipates a strong cyclical rally in industrials, financials, tech (including the Magnificent Seven), and small caps once tariff uncertainties are resolved, with a dovish Fed in 2026 acting as a tailwind.
• Lee dismisses concerns about tariff revenue impacting tax policy as part of a “wall of worry,” arguing that a tariff resolution will drive higher market multiples and present buying opportunities.

Tom Lee, Fundstrat Global Advisors’ head of research and CIO, joined CNBC to discuss the evolving risk-reward profile for equities amid recent developments surrounding tariffs and market dynamics. Lee acknowledged the near-term uncertainty caused by judicial interventions and White House responses, which have muddied the outlook for tariffs. However, he argued that the narrowing scope of potential tariff actions is bringing the U.S. closer to a resolution with other countries, reducing the gap between what the White House seeks and what global counterparts might accept. This progress, he suggested, is a ‘net positive for stocks,’ as it diminishes a key overhang on the market. Lee expressed confidence that the equity risk-reward profile is more favorable now than in February 2025, when the S&P 500 (SPX) was at its previous highs, despite short-term market confusion.

Addressing the recent tech sector movements, particularly Nvidia’s (NVDA) pullback after a post-earnings surge, Lee anticipated a robust cyclical rally once the tariff issue is resolved. He highlighted industrials, financials, and technology – especially undervalued tech giants like the Magnificent Seven – as likely leaders in such a rally. Small-cap stocks, battered by economic uncertainty, could also benefit significantly. Looking ahead to 2026, Lee pointed to a potentially more dovish Federal Reserve as a tailwind for risk assets, reinforcing his view that current market weakness presents a buying opportunity.

Responding to a Barclays (BCS) note suggesting that a tariff resolution could complicate tariff revenues, tax policy, and bond markets, thereby impacting equities, Lee dismissed the concern as part of a broader “wall of worry.” He noted that macro investors and hedge funds have been skeptical of the recent market rally, with prime brokerage data showing high gross but low net exposure, indicating shorting activity. Lee argued that investors are seeking reasons to justify market declines, citing the contradictory narrative that high tariffs were previously feared, yet lower tariffs are now framed as fiscally problematic. He maintained that a tariff resolution would ultimately benefit equities, allowing companies to navigate challenges and supporting higher market multiples in the coming year. Lee’s outlook remains optimistic, emphasizing that clarity on tariffs and improving economic visibility will drive equity gains.

WallStreetPit does not provide investment advice. All rights reserved.

• Bulenox: Get 83% OFF ... Use Discount Code: JJT3A
• Risk Our Money Not Yours | Get 50% to 90% OFF ... Use Discount Code: MMBVBKSM