‘Painful dip’ before gains? Fundstrat’s Tom Lee flags 2026 market turbulence
Will the E.U tariff pause invalidate Lee's 'bear market' projection?
Tom Lee, the founder and head of research at Wall Street firm Fundstrat, foresees a bumpy and “painful” start for markets in 2026. In a recent podcast, Lee reiterated that 2026 may look like 2025, citing tariff escalations, Fed independence, and other catalysts.
Lee added that Jerome Powell’s replacement as Federal Reserve chair could also affect markets.
“The market always tests a new Fed. The process of identifying, confirming, plus the market test can create a correction.”
Taken altogether, he concluded,
“2026 is shaping up to be similar to 2025. So a painful decline may lie ahead, but we would ‘buy the dip.”
For perspective, the U.S tax season and April 2025 tariffs dragged Bitcoin’s [BTC] price down by 11%. It dropped from $84k to $74k. However, it later rallied to $126k by October, only to erase everything in late 2025.
Here, it’s worth pointing out that the market only recovered in Q2 2025 after key tariff deals with China and other countries were reached.
It also must be said that at press time, U.S. President Donald Trump had said that a deal on Greenland was close. This prompted the cancellation of proposed tariffs and a brief market relief. Hence, the question – Is it enough for a potential BTC rebound?
Consolidation or capitulation ahead for BTC?
At the time of writing, Bitcoin’s price was barely holding $90k. It was down 10% from last week’s high of $98k, triggered by tariff jitters.
However, macro risk, including Japan’s bond market crisis, may keep BTC in a price range, according to analytics firm Swissblock. In doing so, it cited its proprietary Bitcoin Risk Index (BRI).
The BRI surged to 21 and was just shy of the High Risk zone of 25 – Marking the current consolidation that began in November.
Swissblock added,
“The bullish case: If this support holds in the short term, we could see a clear push toward targets at $94.8k and potentially $99k. The bearish case: If sellers manage to consolidate price action below $89.2k, the next line of defense for buyers sits at $84.5k.”
That said, institutional demand for BTC via U.S Spot BTC ETFs has cooled off lately. Bitcoin’s price has been closely correlated with ETF inflows. In late 2025, ETFs were net sellers but reversed and became net buyers in early January 2026. This lifted it to $98k.
However, institutional flows have since stagnated near the neutral level, indicative of a pause in the recent recovery as players digest the macro landscape and geopolitical tensions.
Final Thoughts
- Tariffs and a new Fed chair could roil the markets in early 2026, according to Tom Lee.
- Institutional flows improved in early January, but they have since stagnated.
