The Fed Is Hiking Rates. Tom Lee Says That’s Actually Good News for Stocks.

TLDR

• Fundstrat’s Tom Lee says the S&P 500 could top 8,200 by year-end, driven by AI and tech stocks
• Yardeni Research cut its year-end target to 7,900 from 8,400 and raised bearish odds to 30%
• 10-year U.S. Treasury yields crossed 5% this week, a key reason for Yardeni’s downgrade
• Lee expects today’s Fed rate hike to reduce uncertainty and trigger a stock market rally
• Goldman Sachs notes stocks historically average a 2% drop in the three months after Fed hikes begin

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Wall Street analysts are split on where the S&P 500 goes from here, with one prominent bull holding firm and another pulling back expectations.

TOM LEE SAYS ONE OF THE BIGGEST RALLIES OF OUR LIFETIME COULD BE STARTING

He thinks the fourth quarter could mark the beginning of a much larger move into next year:

– Lee says the S&P 500 $SPX could easily finish above 8,200 by year end
– Tech is expected to do much of the… pic.twitter.com/iLAggazV7D

— Tom Lee Tracker (Not actually Tom) (@TomLeeTracker) September 16, 2026

Tom Lee, chairman of Bitmine Immersion Technologies and head of tech research at Fundstrat, told CNBC that the S&P 500 could “easily be above 8,200 by the end of the year.” He pointed to continued strength in artificial intelligence and technology stocks as the main drivers.

Lee also said the Federal Reserve’s expected 25 basis point rate hike could actually help markets. He argued that raising rates now removes the fear of future hikes, which lowers Treasury yields and gives investors more confidence to put money back into stocks.

He noted that large amounts of capital are sitting on the sidelines after recent market down days. That cash could fuel a rebound once investors get clarity on the Fed’s policy path.

Lee added that August headline CPI inflation held at 3.4% year-over-year. He referenced Goldman Sachs research pointing to four temporary inflation drivers: portfolio fees, flash memory costs, trade tariffs, and energy prices. These factors add about 1.7 percentage points to headline PCE inflation but should fade over the next six months.

Yardeni Raises Bearish Odds

Yardeni Research took a different view. The firm cut its year-end S&P 500 target to 7,900, down from 8,400, and moved the 8,400 target to mid-2027. It also raised the odds of a bearish outcome from 20% to 30%.

The firm lowered the probability of its “Roaring 2020s” base case from 80% to 70%. The main driver behind the downgrade was the recent rise in Treasury yields. The 10-year U.S. Treasury yield crossed 5% this week, sitting at 4.988% at time of writing. The 30-year yield was at 5.355%.

Yardeni also cut its year-end forward price-to-earnings assumption to 18.6 from 19.8, while keeping its 2027 earnings forecast for the S&P 500 at $425.

Goldman Sachs Weighs In

Goldman Sachs noted that stocks have historically struggled early in Fed hiking cycles. The S&P 500 has averaged a 2% decline in the three months after past hikes began, but gained an average of 9% over 12 months. The only exception was 2022.

Goldman’s chief U.S. equity strategist Ben Snider said the medium-term impact on stocks depends on how tightening affects earnings growth.

Lee pushed back on broader pessimism. He said corporate earnings have not yet peaked and that weak housing investment leaves room for further economic expansion. He estimates housing recovery could add $30 to $50 to S&P 500 earnings.

He does see a potential pullback later in the year tied to high AI firm debt and a busy IPO calendar, but said widespread market pessimism is itself a reason stocks have not yet hit their ceiling.

Yardeni kept its end-of-decade S&P 500 target at 10,000.