US Stock Market Looks More Favorable Now Than Pre-Trade War, According to Fundstrat’s Tom Lee – Here’s Why

Fundstrat’s head of research Tom Lee believes that US equities are in a much better position now compared to the period before Trump ignited a trade war.

In a new interview on CNBC Television, Lee says heightened optimism for 2026 and US companies thriving during hard times are signs suggesting the stock market looks more favorable than it did before Donald Trump sparked a trade war with numerous nations.

“When we go back to February when the market was at all-time highs, we have to keep in mind, we had a lot of uncertainties ahead of us and we weren’t necessarily looking at 2026.

The tariff visibility is much better today than it was three months ago, and when we look at 2026, I think there are things to look forward to, such as deregulation, tax cuts, and a [Federal Reserve] that’s on hold now but probably doing more cuts in 2026.

From a company perspective, companies survived, I think, a black swan event. That waterfall of decline in equities and the near heart attack of the economy was an environment where companies produced earnings that beat expectations. I mean, this is the fifth stress test for businesses [and] when I put all that together, I think PE (price-to-earnings ratio) is probably going to be higher in six months than lower, and when you think about 2026 earnings having upside, I think there’s upside for stocks.”

Lee goes on to say that investor sentiment shifting to neutral or positive could help stocks during the second half of the year. He also notes that institutional players are underexposed on the stock market.

“We know a lot of institutions didn’t add risk back as the market rallied.

So I think the pullbacks are going to be pretty shallow because investors just are underinvested at the moment. And then when you look at sentiment, it’s barely turning neutral now, so if investors have been fighting this rally, as they become more optimistic or neutral, that’s upside for stocks.”

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