This Wall Street Veteran Says the Market Has Bottomed — Here’s What He Thinks Comes Next

While the Dow slides into correction territory and the “fear gauge” flashes red, the loudest voice on Wall Street is also the calmest. Fundstrat’s Tom Lee, the strategist who defied the recession crowd to correctly call the 2023 bull run, is not flinching. If anything, he is raising the stakes.

Lee set a bold 7,700 year-end target for the S&P 500 back in December 2025, and in early April he added a definitive bottom call to the mix. Speaking on CNBC on April 8, 2026, he pointed to a telling signal: even as the U.S.-Iran conflict intensified and oil climbed sharply, equities refused to break down. The Iran ceasefire announcement the following day confirmed his read. From the late-March lows, the S&P has since clawed back roughly 8.6%, validating a thesis that many doubted at the time.

Lee is not simply chasing the AI-fueled Magnificent Seven, though. He is eyeing what he calls a “Great Rotation” into the unloved corners of the market: Energy and Materials. And by April 12, he had refined his nearer-term view, telling CNBC he now sees 7,300 as a realistic waypoint before any potential “inflation shock” creates fresh turbulence later in the year.

The “Catch-Up” Trade

The logic behind Lee’s sector preference is straightforward. Big Tech did the heavy lifting for years, leaving Energy and Materials lagging the broader index. Lee has highlighted that roughly 70% of the S&P 500 has recently worked through a rolling bear market, with energy and financials absorbing their hits first, followed by software and Magnificent Seven names. That sector-by-sector repricing, Lee argues, means any future pullback is unlikely to be as severe because the damage has already been done in pockets of the market. Energy and Materials, now priced modestly after years of underperformance, are his answer for where the next leg of gains could come from.

For broad, low-cost exposure to those two sectors, the State Street Energy Select Sector SPDR ETF (NYSEARCA:XLE) and the State Street Materials Select Sector SPDR ETF (NYSEARCA:XLB) are the natural vehicles. Both trade at tight expense ratios, carry deep liquidity, and track the energy and materials components of the S&P 500 directly.

The Energy Select Sector SPDR ETF has pulled back close to 9% from its recent high, which creates a potentially more attractive entry point relative to where the fund was trading earlier in 2026. The fund carries a yield of roughly 2.5% and holds the large-cap energy names that dominate the sector. With geopolitical uncertainty still keeping oil in focus, the energy sector’s case as a portfolio diversifier remains intact.

The Materials Select Sector SPDR ETF presents a similar picture for investors drawn to mean-reversion opportunities. The basic materials sector is only beginning to show upside momentum after a prolonged period in the shadows. The fund yields around 1.7% and trades at a trailing price-to-earnings multiple of roughly 26x, a valuation that looks reasonable given the demand tailwinds building behind industrial metals, construction materials, and chemicals tied to the energy transition and AI infrastructure buildout. Lee also flagged that wartime dynamics tend to accelerate demand for precisely the materials this fund tracks, adding another layer to the thesis beyond pure cyclical recovery.

Editor’s note: This article updates the S&P 500 recovery figure from the late-March lows to 8.6% (from the original 5%), adds context around Lee’s early-April bottom call tied to the Iran ceasefire, incorporates his subsequent near-term 7,300 waypoint and “inflation shock” warning from his April 12 CNBC appearance, and refreshes the XLB trailing P/E to 26x and dividend yield to approximately 1.7%.