Tom Lee says investors are in a new bull market following the April lows, and prefers small caps in the second half of the year as buyers start to look past tariff risk. “I think what happened at the April lows — which was very capitulatory, and that was a huge liquidation event, and we had a VIX spike to 60 — that is the kind of flush and reset that I would associate with a new bull market,” Lee told CNBC’s ” Money Movers ” on Friday, referring to the CBOE Volatility Index . “I think we had what was a miniature bear market, but has essentially rebirthed the new bull market.” The head of research at Fundstrat Global Advisors expects any dips from here on will be “pretty shallow,” given the boost markets can get later in the year from potential deregulation and new tax benefits. He also expects the Federal Reserve, which has held interest rates steady since December amid tariff uncertainty, will start to ease monetary policy more aggressively in 2026, another bullish tailwind for stocks. “We still think dips are going to be pretty shallow. It’s still the most hated V-shaped rally. I mean, the Covid rally was hated until we made new highs. And the rally from the fall of 2022 was hated until we made new highs. It’s not any different this time,” Lee said. “While a lot of people are calling a top, I actually think that this is more of a mid-cycle kind of start of a new bull market,” Lee added. Lee said he favors a barbell investment strategy, allocating more toward the ” Magnificent Seven ” in the near term amid a tech-fueled comeback, and then a preference for small caps in the second half of the year. The Russell 2000 small-cap index has been especially punished this year, down more than 7%, while the S & P 500 is virtually unchanged as investors dumped riskier, more indebted companies for safe havens. “As I look at the second half, I think the small caps really have a strong case to be made because as long as we move towards a tariff resolution, or the markets feel that way, then I think investors can actually start putting flows back into stocks other than the Mag Seven,” Lee said.
