Tom Lee predicts S&P 500 could reach 8,800 after 10‑20% fall

The S&P 500 was at 7,537 on July 6, 2026, and Fundstrat’s Tom Lee warned that a 10‑20% pullback could precede a climb to as high as 8,800 before year‑end [1].

Lee’s upside case

Lee bases the upside on 2026 earnings of roughly 400 points and a price‑to‑earnings multiple of 20‑22×. At a 20× multiple, 8,000 equals 20 × 400; a higher multiple would lift the index to 8,400‑8,800 [1]. He notes that the S&P’s P/E is already about 1.1 “full turns” lower than in January, implying the market is cheaper despite the rally. J.P. Morgan’s 2026 outlook projects earnings growth of 11% in 2025 and 13% in 2026, supporting Lee’s earnings assumptions [1].

Risks and the expected dip

Lee cautions that a bear‑market‑like correction is likely between August and October, estimating a 10‑20% decline. He points to four risk drivers: the Fed’s new policy framework, a gradual unlock of SpaceX shares, a cumulative shortage of petroleum products, and elevated margin debt [1]. The Federal Funds target upper bound sits at 3.75%, down from 4.5% in September 2025, while core PCE remains in the 90.9th percentile of the past 12 months, making any policy shift under the new framework consequential [1]. Energy‑supply concerns are underscored by the EIA’s warning that Strait of Hormuz disruptions could push Brent crude toward $106 per barrel [1].

What to watch

• Q2 earnings releases (mid‑July) – stronger‑than‑expected results would reinforce the earnings‑driven upside Lee envisions.
• Fed commentary (late July‑early August) – signals on the new policy framework could affect the timing and magnitude of the anticipated pullback.
• Petroleum supply alerts – any escalation in Strait of Hormuz tensions that moves Brent toward $106 would validate the petroleum‑shortage risk Lee highlighted.

Lee assigns roughly a 60% probability to his roadmap, acknowledging uncertainty while emphasizing that a 10‑20% dip would be a temporary correction within a broader bull market. The market’s reaction will hinge on whether earnings beat expectations and whether the Fed’s policy stance eases the inflation backdrop.