Fundstrat's Tom Lee Targets S&P 500 at 7,700, Predicts Market 'Digestion Period' Through October

According to Fundstrat strategist Tom Lee speaking to CNBC on June 5, the S&P 500 may enter a three-phase cycle. The index, which has gained nearly 11% year-to-date, currently sits above 7,560 and could push toward 7,700 in the near term, driven by stronger-than-expected corporate earnings. Lee noted that first-quarter earnings per share came in near 80 dollars, versus market expectations of 70 dollars, suggesting potential upside of 800 to 1,000 points for the index if the trend continues.

Lee predicts a "digestion period" from June through October, when the market may face headwinds from policy uncertainty and increased equity supply, potentially triggering a downturn similar to a bear market. However, he expects this phase to ease after the U.S. midterm elections, leading to a renewed rally, with 2027 potentially becoming "one of the best years this generation of investors has experienced."