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Tom Lee, one of the best analysts in the business, just released his 2026 stock market prediction. And it is wild. It is absolutely incredible. We have to talk about it and we will. But before we do, I only ask you to click nothing, smash nothing, buy nothing. Just listen and pay attention. So, what we're going to do in today's video is very simple.
Number one, I'm going to show you a clip of the Tom Lee arguments, at least the highlights, so you can hear it from the man himself. I'm not going to be paraphrasing Tom Lee, who's arguably one of the best analysts in the business. After that, I'm going to share with you my thoughts, my reaction, my analysis to everything that Tom Lee has said, and I will be brutally honest and objective.
I owe nothing to nobody. After that, I'm going to offer you my own 2026 market breakdown, prediction, the whole nine yards. After that, I'm going to share with you my strategy, what I'm doing for the next 12 months, what I'm looking at, what I'm being cautious about, everything you need to know about 2026 in this video.
So, I advise you to stay on, watch till the end because at the end, I'll also share with you a little bonus. So, you probably don't want to miss out on that. So, first foremost, let's hear Tom speak. Then, I'll get back to you and we'll break it apart in a second. Check it out. I think it's still possible to have a double digit year.
There have been 12 times in the last h 100red years where markets posted three years of 20% gains. This year hasn't finished yet. Um globally half the time markets do even better in the following year. So I think next year is a year where the debate's going to be is the bull cycle over or is it going to extend?
I think it's going to create quite a lot of volatility in the first half but I think GDP growth stronger. We have a dovish Fed. Valuations are reasonable. So I think we end up exiting very strong. We have to keep in mind the equal weight S&P 500 PE is 17 times. It's lower than it was 5 years ago. So the market actually has derated in the last 5 years because of these black swans of the shutdown, inflation surge, fastest Fed hikes in history, etc.
So actually the the equal weighted market is is cheaper. I don't think I don't think risk is actually that expensive. Okay, so let's break apart everything important Tom Lee just said. So Tom is saying that we're getting off a three-year bull cycle. 24% 23% 17% so far in 2025 and 2026 might offer a similar potential for a doubledigit year.
However, there is a caveat. Tom is saying that the volatility in the first half of 2026 might be elevated and that may lead to a very precarious first half of 2026. Although overall it is probably going to be a double-digit performance year in depositive. Now he says that for the past 100 years we had 12 times of three consecutive bull markets of 20 plus% gains which means that this is number one not that uncommon but number two he also points out that 50% of the time the markets did even better in year four than year three.
That's another thing to consider. And of course he says that year four this meaning 2026 is going to be characterized by a lot of volatility because of tariff scare and we have a new Fed chair a lot of uncertainty. So the volatility might come in early but that will not prevent the year from being overall positive.
He also speaks about the fact that the S&P isn't really that expensive if you actually look at equal weight. According to Tom Lee, the equal weight S&P 500 PE is only 17, not 28 or 29. And it's actually a lot lower than what we had during the 2020 highs. And that is everything Tom Lee said in this clip.
So on FS Insight, Tom Lee actually expanded on this topic and provided six more points that clarify how bullish is about 2026. Number one is that we actually survived seven corrections in 2025. That means the market is resilient and the market is actually pretty strong. Number two, AI remains really really one of the most dominant forces for the next 10 years.
It's a really strong theme and valuations are far from being fresh if you understand true potential of AI and even if you compare current valuations into the 1999.com era, Cisco was being traded at 200 forwardp 30. Number three, we have still a strong crypto markets ahead which is going to drive the stock market as kind of this side effect.
Number four, inflation is actually coming down and we're currently at 2.6% which means that there's no pressure on the Fed to be hawkish. And that also leads us to the fact that the Fed will be dovish over the next year. And finally, the negative wall, the sentiment being absolutely abnormally bad right now, even though the markets are really doing great, is also going to fuel 2026 into a really, really good year.
So overall, given the fact that Tom Lee actually put this on his own website and what he said in the CNBC clip you just saw, he basically says, "Look, we may have a slow start to 2026. Don't freak out. Stay the course, but the other 6 months, if that happens, will be very strong. So that the overall rally is going to give us probably double digits again in 2026." And here's where I stand on this particular topic.
I agree with Tom Lee that 2026 is shaping up to be a very, very strong year. But there is a caveat here and there is a point of warning I want to convey to you. It is definitely going to be more risky than anything we've seen for the past 3 years. But more on that in a bit. I think that right now we're seeing this Goldilock scenario being played out in the macroeconomic background because unemployment is at 4 and a.5%.
Which is the perfect equilibrium point. Too low unemployment means too high inflation. Too high unemployment means recession. So 4 1/2% the markets read that as the perfect equilibrium to start a massive run. So this is perfect for stocks for now. Now, on top of this, we have falling rates coming in from the Fed and yes, they're probably not going to cut them next cycle, but 2026 is going to be another dovish year.
And that's going to be a massive, massive effect on the stock market because on top of the sentiment also, you have to remember that lower rates mean that the DCF valuations, the present value of future, future things that may happen in the five, six years, they are worth more money today. So as rates come down, valuations go up, sentiment goes up and stocks that are mainly were the casualties of these high rates, they will have to catch up such as small caps.
Now capex as far as the AI cycle is still far from over in my opinion. And I do believe that that capex that money spent in 2026 is going to fuel the earnings to go and get even better and better, which is going to expedite the stock market performance into another bull cycle. higher stock prices because of higher earnings because of more money coming from AI copics which is totally totally makes sense to me.
Now, I'm not afraid of the fact that we had, you know, an average of about 30% per year for the past 3 years, which is a hell of a lot higher than the average. That in itself does not scare me, right? Because over the past 40 years, uh, we had four five year bull cycles, which means that over the past 40 years, 20 years, 50% of that time, we were in the bull cycle that lasted at least 5 years.
That's not abnormal. That's pretty par for the course. Now, that doesn't mean risk does not exist. In fact, risks exist. And as we go into 2026, said risks are getting stronger and stronger, bigger and bigger. We're essentially pulling on the rubber band. And the harder we're pulling on the rubber band, the more it stretches, the bigger the impact is going to be when it happens.
And 2026, thus has so much potential, so much upside, but also so much elevated risk. And this is why we have to talk about the perfect strategy for 2026 which is going to either make or break a lot of portfolios. Now when we talk about 2026 obviously we're going to carry over a lot of existing structural risks that have been around for a long long time such as the Japan carry trade which is dangerous because people keep borrowing for some reason cheap yen and investing it hoping to continuously work around this infinite money glitch.
at some point is going to end and it will have a negative impact on the market once it happens. The AI capex cycle might actually be getting ahead of itself a little bit which might slow things down and also we are potentially looking at some job loss from AI which may lead to higher unemployment. So all these things what we've been talking about for the past year they're still here and those are structural risks that will travel with us into 2026 but we have added risks in 2026 that are not on this list.
Number one is that as we head into year four, we're essentially jumping and we're longer in the air, but eventually gravity is have to take place. So when you leap, even if you have a footage vertical, at some point you got to land. And the longer we stay in the air, the closer we get to the point where we have to land, we're essentially getting away from the average and we're getting more away, more away for longer.
At some point, the average will pull you back. This just the way statistics work. Number two, the job market is slowing down. It's not at a breaking point yet, but it never just happens overnight. The job market is like, you know, bad teeth. It happens over months. At some point, you wake up in the middle of night, you're screaming out of pain.
But for for months, all you felt is just minor pain, which is exactly what's going to happen with the job market. And if it happens in 2026, if it finally cracks, well, the impact is going to be very severe. On top of this, if the Fed cuts rates too quickly, which might happen, who knows? If that happens in 2025, inflation might actually come back stronger than ever like it happened in the late 70s.
Then we had to call Paul Vulker and save the economy by throwing it into a massive recession. On top of it, the higher the higher we go in the stock market. The more euphoria and the sentiment we have, the more the shoe shine boy example is going to play out. The more people who do not understand the market, who only think that stocks only go up, they will pile into the market, drive valuations even higher, and bring about closer and closer the eventual correction that is bound to happen.
It's not a question of if, it's a question of when. Which means that the bottom line here is that 2026, even if it's a great year, it brings us closer and closer to what we call a late cycle behavior, late cycle patterns, which basically happens at the end of every market cycle. We go from hope to belief to euphoria and then to a correction.
And every day we go further and further into a bull market. The chances of happening increase. That's just math. And you have to understand that the timing of the market cycle isn't linear. The time it takes to go all the way to belief might take a few years, but we can go from belief to euphoria in 6 months.
It can happen super super fast. And when it happens, there's a lot of craziness. There's a lot of euphoria, a lot of fireworks. Basically, everybody's making so much money until poof, they don't. Now, 28 PE on the S&P 500. History shows us that there's a huge risk of a correction. Now, it doesn't mean it happens tomorrow or the next month or the next 6 months, but it does show us that the markets are elevated in valuation historically, which means we have to talk about strategy.
Okay, Tom, we understand it. We understand that 2026 might be an incredible year, but also as we become more and more obsessed about the markets going into all-time highs, the risk also increases. So, what do we do? Do we sell everything? No. This ain't the time to sell everything because it's never the time to sell everything.
Okay? Number one, you have to embrace the system. Think, act, react. As simple as that. Remember that. Okay? Think at react means you have to watch for late cycle patterns before you even start freaking out. What are these late cycle patterns? And every one of these late cycle events over the course of history, the same thing played out.
Whether it's 1929 or 2022 or all of them, you can go back and see. You have speculative inflows going up the wazoo. You have marginal debt going through the roof. You have short-term gain which is completely normalized. people make 30% a month and they're like, "Ah, nothing." And you have valuations exploding out of the stratosphere.
Cisco went to 210 PE in the com crash. On top of this, you have this wild sentiment across retail investing that you just can't lose by being in the stock market. When that happens, this is the time where you say, "Okay, I have to start watching this market." This is becoming a very precarious situation.
But watching it and being spooked out, alarmed and panicked isn't the same thing. You have to remain calm, logical, and absolutely stoic. There's no point in being emotional about this. Now, the second stage after you embrace the think, act, and react system is hurry up and do nothing. Relax. Okay? Even if we started investing in 1999, the day before the docom crash, and we stopped investing at the bottom of 2022, and we just put in $100 into the market over 20 years, we are up 340% in this hypothetical scenario with a last decade starting and ending in the possible time that is the worst.
We still made 340% in 20 years. If you take right now, and I'm going to show you the magic of compound interest and why giving up compounding is silly. If you missed the best 10 days in the market over the past 20 years, you have cut your returns by 50%. You already know that. But guess what? I'm going to show an example that's going to clarify all of this.
If you put in $25,000 today into the SP00, and you keep adding $700 per month, and you do this over the course of 25 years, you know, that's it. 25K up front, 700 a month for 25 years, you have 1.1 million when you're done in 25 years, your retirement is right there, just in front of you. I'm not saying that 1.1 million is enough to retire.
I'm just saying that the system is quite simple from 25K to 1.1 million by essentially being a passive investor in the stock market over the long haul. The key here is the long haul. The longer you do it, the better the results are. So yes, this is why rich people get richer because they understand the compound effect.
And this is why rich people never panic sell, not in COVID crash, not in any other crash. They always stay invested. The average investing period for a top investor in the US, somebody with a million and above portfolio is 12 years in any particular stock. Think about it. And now we get to the important part, the correct strategy.
Now you have to prepare, not predict. This is the important distinction. People who predict bottoms and tops fail. People who prepare for whatever happens succeed. So to do that, I'm going to show you six simple steps. Number one, keep a long-term mindset and essentially continue to dollar cost average into your stocks and your ETFs.
Number two, trim 20% 30% of your biggest winners right now to mitigate risk. Something that's been running up for years, trim 20%. You're still in the market at 80%, just some profits. Number three, reduce portfolio fragility. You can do that by getting rid of margin. Number four, increase diversification either through adding the SP 400 or defensive stocks such as telecom, such as healthcare, such as consumer staples.
You know exactly what I mean. Number five, add protections to your portfolio if you don't have one right now. For example, you can add three types of stocks, which I just mentioned. Add some consumer staples, add some healthcare, add some telecom things that don't really drop hard in these crashes we've seen in history.
But the other thing you can do is you can carve out a piece of your portfolio and turn it into what I call an all-weather portfolio, a cockroach portfolio. Now, we have two lectures on this in the academy, lecture seven and lecture 17 in the rock academy over at patreon.com/domnash. You can go ahead right now, sign up, watch these lectures and learn about it.
Essentially, by carving out a piece of your portfolio and turning it into an all-weather cockroach portfolio, you're securing yourself. If something really horrible happens, 99% of people will be destroyed because they're hoping it doesn't happen. But you have already the protection and you have set up and yes you will get wet like everybody else but you will survive to fight another day.
And of course number six the most important part build a cash reserve. It's going to help you to sustain yourself. It's going to help you not to sell stocks if they crash but mostly it will give you the dry powder to go into the market and buy these companies on cents on the dollars. And which companies?
Well, I actually have a list of the top 15 stocks to buy today and hold for the next 10 years. This list is absolutely for free. The link is in the description and in the pin comment. Go get it right now. The list is there for you to pick from. Now, 2026 is shaping up to be a year full of fireworks.
That's pretty obvious. I mean, we might see 8,500 on the S&P 500. In fact, it's quite possible. But the flip side, the higher we go and the more excitement we're going to have, the more you have to be aware of your backside protection of risk management. Most people, the more they get excited about the market, the less they care about downside protection.
You know what they say, time horizons of investing, they expand to infinity in bull markets and they contract to one day in bare markets. I just want to make sure you understand the higher we go and we will go higher in 2026 the more you have to start thinking about protection risk mitigation and literally do the opposite of the average retail investor.
Now this extraordinarily of the market which I'm expecting for 2026 is going to work in both ends. You have to understand this right? You can't have without the other and we will see all-time highs. We will see crazy markets but we may also see an end to a bull cycle. And whether it happens or not, you have to be ready.
Prepare, not predict. Those who will prep will have a long-term mindset, will be emotionally, mentally, financially prepped for whatever happens. They will use this to make a lot of money. And those who don't, they will get screwed. In 2022, when most investors ran away from the market and got absolutely destroyed, we bought stocks like Palanteer at $7, at $8, at $9, at $10, and we kept buying them for a whole year while everybody were out of the market.
We used 2022 stock market crash, bare market, whatever you call it. We use that event to make generational wealth. And the next time this event is going to play out, we're going to use it again to make even more money. If you want to be a part of our community and do this with us, join paint.com/dommnash.
Would love to have the academy. We're almost at 30,000 members. Join today. Check out the lectures. Check the Discord. And I'll see you there in just a
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