Quick Takeaways
- Tom Lee forecasts a 250-point S&P 500 gain in November.
- Fund managers’ performance chase could fuel the rally.
- AI-driven profits and easing inflation support optimism.
Tom Lee Sees Major November Rally Ahead
Fundstrat’s Tom Lee predicts the S&P 500 could jump 250 points in November, driven by fund managers chasing year-end performance targets.
With over 80% of managers trailing benchmarks in 2025, Lee expects a “performance chase” as institutions increase equity exposure to close the gap.
Historically, November favors stocks, and Lee believes the setup for a strong finish is already in place.
Fund Managers Fuel Late-Year Buying
Speaking to CNBC, Lee said fund managers often buy aggressively when they lag performance benchmarks. This pattern tends to boost returns during strong seasonal periods like November.
The S&P 500’s sharp rebound in 2025 adds weight to Lee’s case. After dropping more than 15% earlier this year, the index is now up double digits year-to-date.
Analysts note that similar market reversals, such as in 1982, 2009, and 202, were followed by another year of double-digit gains.
Seasonal Trends Support the Bullish Outlook
Data backs up Lee’s optimism. When the S&P 500 added over 15% year-to-date before November, the exponent historically averages out a 2. 7% monthly return.
Since 1927, November has been the third-most potent month for equity, with amplification in 59% of years and a mediocre ascension of 1. 01%.
In presidential election years, the month has been even stronger, rising 67% of the time with an average 0.67% return.
AI-Labor Earnings Strengthen Market Resilience
LeLee’s season that AI-fueled corporate earnings will hold, supporting the rally. Society across spheres is expanding its borders through mechanization and productivity gains from artificial intelligence.
He said that core inflation is cooling, while shelter costs are stabilizing, giving the Federal Reserve more flexibility and reducing the danger of raw pace hikes.
This background produces favorable conditions for both stocks and crypto assets, as Bitcoin and Ethereum prove resilience alongside a jump in stablecoin activity and app revenues.
Valuation Risks Stay Despite Optimism
Some analysts warn that valuations look stretched. The S&P 500 now trades at 40 times free cash flow, only 25% below dot-com era levels.
This ratio nearly doubles the average of recent bull markets, sparking caution among value investors.
Lee counters that AI-driven profit growth justifies higher multiples, arguing that traditional metrics underestimate the technology’s impact on long-term earnings.
Year-End Rally or Overheating Risk?
As November spreads, investors will see whether fund managers’ urging and AI momentum push the S&P 500 toward 7,000.
The solution examines corporate earnings, inflation data, and upcoming Federal Reserve decisions. Immediately, Tom Lee stays sure-footed that history, seasonality, and fundamentals all point to a strong year-end rally.
