The Compound and Friends – "What Tom Lee's Worried About in 2026"

Date: January 30, 2026
Host: Downtown Josh Brown
Co-host: Michael Batnik
Guest: Tom Lee, Co-Founder, CIO, and Head of Research at Fundstrat Global Advisors

Episode Overview

This episode features Tom Lee discussing his outlook for 2026, the resiliency of the stock market, the current state of AI stocks and broader markets, and the rapidly evolving roles of precious metals and digital assets. The conversation dives into market cycles, risk factors, and the increasing influence of robotics and blockchain on the economy and investing. As always, Lee’s trademark data-driven optimism is balanced by the hosts’ pointed questions about risks, bubbles, and future shocks.

Key Discussion Points and Insights

1. Market Outlook for 2026

[06:33] Josh Brown: "Are you bullish still?"
[06:43] Tom Lee: “We just think 2026 will look like last year. So our base case is we are strong in the first part of the year, but then we have a drawdown that feels like a bear market... But we’ll rally strongly and I think at least a 10% gain, maybe more now.”
Lee sees the first half of 2026 as strong, followed by a significant but V-shaped drawdown (possibly 20%) not rooted in fundamentals but rather in policy shocks or externalities.

2. What Fuels Lee’s Market Calls

[09:52] Josh Brown: “How do you stack the odds in your favor to be right more often than you’re wrong?”
[11:51] Tom Lee: Describes cross-market analysis as "feeling your way around in a dark house," identifying where you are by volatility, credit, and commodities. He highlights "don’t fight the Fed" and "demographics are destiny" as core frameworks.
[13:59]: Earnings growth and broadening market participation are not late-cycle features, suggesting more legs in this bull run.

3. Resilience and "Indestructibility" of the Market

[21:12] Tom Lee: “If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher.”
[21:47] Lee and the hosts discuss how the market’s ability to withstand “six black swans” (COVID, Fed hikes, supply shocks, etc.) speaks to its fundamental strength: “It’s acting more indestructible than many people appreciate.”
[21:54] Josh Brown: “People have more faith in the earnings power of American companies than they have faith in any of our elected officials.”

4. Rotation and Breadth: Winners and Losers in Tech

[23:44] Discussion on the market separating “the wheat from the chaff”—tech stocks are decoupling, with some (Meta) surging while others (Microsoft, Oracle) are in drawdowns.
[24:05] Tom Lee: “I’d probably guess it’s misplaced. I think Microsoft’s been written off in the past … and it came roaring back.”
Lee cautions against calling time on AI or software, noting the market might temporarily view software as the loser as AI displaces some business models.

5. Headwinds: Margin Debt and Policy Shock

[30:45] Margin debt at record highs: “If you look at the year-over-year change, it’s actually positive for stocks until the percentage gain exceeds 38%. … it’s at 36 right now, so it’s almost there.”
[32:23] If margin growth crosses that threshold, forward returns turn negative, making a market correction more likely.
[26:08]–[26:47] Lee sees policy shocks (White House, Fed) as the likely sources of turbulence ahead.

6. Precious Metals and the Waning "Everything Bubble"

[15:47] Precious metals are the star trade, with talk of gold at $8,900, driven by small shifts in asset allocation rather than wild demand spikes.
[19:09] Tom Lee: “If you just do high net worth, half a percent allocation incrementally into gold, now you’re at $9,000.”
[20:44] The "AI bubble" narrative has faded. Valuations have moved sideways through multiple crises.

7. Crypto, Blockchain, and Stablecoins

[44:58] Energy, materials, and digital assets are Lee’s top sector picks for 2026.
[47:42]–[52:37] Discussion about crypto’s sudden weakness. Lee explains the massive deleveraging event (the largest in crypto’s history) and posits that risk appetite will recover after a “reset.”
[53:24]–[55:46] Lee discusses institutional embrace of blockchains (Fidelity, Standard Charter, UBS, Larry Fink), noting the real bullish case is increasingly for Ethereum.
[57:38] “Tether is now possibly one of the top-5 most profitable banking operations in the world.”

8. Macro Themes: Broadening, International Stocks, and Economic Shifts

[41:07]–[44:41] Breadth is returning—more stocks, more regions leading.
[44:23]–[44:41] International equity outperformance is likely a multi-year story, bolstered by capital market reforms and dollar weakness.

9. Robotics, Labor Shortages, and Economic Transformation

[66:30] Josh asks about the investment case in robotics as autonomy and automation move from hype to deployment.
[66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
Lee sees robots as a solution to structural labor shortages, with massive potential GDP and possibly even enough tax revenue to eliminate personal income taxes.

10. Social Implications and Optimism

[68:05] Lee envisions a world where robots, not people, are taxed.
[69:06] He draws parallels to prior technology-driven labor transitions, like farming after refrigerated transport, suggesting disruption will lead to a new era of prosperity.
[71:05] Acknowledges the need for social policy updates and hopes for a positive societal adaptation.

11. Granny Shots Update

[72:16] Tom Lee highlights the continued outperformance and growing assets in the “Granny Shots” strategy portfolios (now $4.8 billion total across three products).

Notable Quotes & Memorable Moments

[13:01] Tom Lee: “Don’t fight the Fed. And … demographics are destiny.”
[21:12] Tom Lee: "If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher."
[21:54] Josh Brown: "People have more faith in the earnings power of American companies than they have faith in any of our elected officials."
[41:16] Tom Lee: “This is confirming a broadening, is confirming a bull market. It's very good for institutional stock picking.”
[44:33] Tom Lee: “There could be a long tail to that story. The more I look at it, the like, the less I think it’s just a one year thing.” (on international equities)
[66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
[68:05] Tom Lee: “I think we could stop paying taxes because the robots are the ones that are taxed.”
[69:06] Tom Lee: “Every American today is gonna benefit from the surplus generated by robots.”

Important Timestamps

| Timestamp | Topic / Segment | |-------------|-----------------------------------------------------------------------| | 06:33–07:03 | Tom Lee gives his 2026 outlook: early strength, then sharp drawdown, ending higher | | 09:52–11:51 | Lee’s approach to market forecasting: cross-market analysis, cycle awareness | | 13:01–14:13 | Core investing frameworks: "Don't fight the Fed" and demographic trends | | 15:47–18:28 | Gold, silver, and everything rallies—are they late-cycle, or new regime? | | 20:44–21:39 | Fading AI bubble: major tech corrections despite AI hype | | 21:12–21:47 | Why the market seems “indestructible” | | 26:08–26:47 | Policy shocks and the probability of gains if early-year returns are positive | | 30:45–32:23 | Margin debt risks, and signals for forthcoming corrections | | 41:07–44:41 | Breadth and international allocations; are we early or late? | | 44:58–46:35 | Why energy and basic materials top Lee’s picks now | | 47:42–53:24 | Crypto market: deleveraging, pain, but possible end of the selling | | 53:24–57:24 | Blockchain adoption by institutions—why Ethereum may benefit | | 66:30–67:10 | Robotics: Lee’s vision of automation solving labor shortages | | 68:05–69:06 | Robots as economic/tax actors, personal income taxes disappear? | | 71:05–71:47 | Social adaptation to AI/robotics advancement | | 72:16–73:20 | "Granny Shots" portfolios’ assets and performance update |

Overall Tone

The conversation is playful but deeply analytical, blending Tom Lee’s optimistic, quantitative perspective with the hosts’ skepticism about bubble narratives, margin excess, and tech corrections. Lee’s calm, data-driven optimism stands out, especially juxtaposed with the hosts’ energetic banter and tough questioning.

Takeaways for Investors

Expect choppiness but not doom: Lee projects a mid-year correction, likely policy-driven, but expects a robust recovery and strong year overall.
Market resilience is real: Despite six market “black swans” since 2019, earnings and valuations have proven remarkably robust.
Breadth and sector rotation matter: Bullishness in "basic" materials, energy, and international stocks is anchored in mean-reversion and new leadership.
AI and robotics are real but disruptive: Not all beneficiaries are obvious and some, like software, may be “losers”—for now.
Crypto: short-term pain, long-term development: Recent deleveraging signals a possible bottom. Blockchains are quietly being adopted on Wall Street, especially Ethereum.
Society will need to adapt: Robotics could create surplus so large that old fears about economic displacement may be overblown—but only if policy evolves, too.

Links

This summary captures the core debates (policy risk vs. market resilience), Lee’s unique frameworks, and the colorful moments that make The Compound and Friends essential listening for investors.

The Compound and Friends – "What Tom Lee's Worried About in 2026"

Date: January 30, 2026
Host: Downtown Josh Brown
Co-host: Michael Batnik
Guest: Tom Lee, Co-Founder, CIO, and Head of Research at Fundstrat Global Advisors

Episode Overview

Key Discussion Points and Insights

1. Market Outlook for 2026

[06:33] Josh Brown: "Are you bullish still?"
[06:43] Tom Lee: “We just think 2026 will look like last year. So our base case is we are strong in the first part of the year, but then we have a drawdown that feels like a bear market... But we’ll rally strongly and I think at least a 10% gain, maybe more now.”
Lee sees the first half of 2026 as strong, followed by a significant but V-shaped drawdown (possibly 20%) not rooted in fundamentals but rather in policy shocks or externalities.

2. What Fuels Lee’s Market Calls

[09:52] Josh Brown: “How do you stack the odds in your favor to be right more often than you’re wrong?”
[11:51] Tom Lee: Describes cross-market analysis as "feeling your way around in a dark house," identifying where you are by volatility, credit, and commodities. He highlights "don’t fight the Fed" and "demographics are destiny" as core frameworks.
[13:59]: Earnings growth and broadening market participation are not late-cycle features, suggesting more legs in this bull run.

3. Resilience and "Indestructibility" of the Market

[21:12] Tom Lee: “If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher.”
[21:47] Lee and the hosts discuss how the market’s ability to withstand “six black swans” (COVID, Fed hikes, supply shocks, etc.) speaks to its fundamental strength: “It’s acting more indestructible than many people appreciate.”
[21:54] Josh Brown: “People have more faith in the earnings power of American companies than they have faith in any of our elected officials.”

4. Rotation and Breadth: Winners and Losers in Tech

[23:44] Discussion on the market separating “the wheat from the chaff”—tech stocks are decoupling, with some (Meta) surging while others (Microsoft, Oracle) are in drawdowns.
[24:05] Tom Lee: “I’d probably guess it’s misplaced. I think Microsoft’s been written off in the past … and it came roaring back.”
Lee cautions against calling time on AI or software, noting the market might temporarily view software as the loser as AI displaces some business models.

5. Headwinds: Margin Debt and Policy Shock

[30:45] Margin debt at record highs: “If you look at the year-over-year change, it’s actually positive for stocks until the percentage gain exceeds 38%. … it’s at 36 right now, so it’s almost there.”
[32:23] If margin growth crosses that threshold, forward returns turn negative, making a market correction more likely.
[26:08]–[26:47] Lee sees policy shocks (White House, Fed) as the likely sources of turbulence ahead.

6. Precious Metals and the Waning "Everything Bubble"

[15:47] Precious metals are the star trade, with talk of gold at $8,900, driven by small shifts in asset allocation rather than wild demand spikes.
[19:09] Tom Lee: “If you just do high net worth, half a percent allocation incrementally into gold, now you’re at $9,000.”
[20:44] The "AI bubble" narrative has faded. Valuations have moved sideways through multiple crises.

7. Crypto, Blockchain, and Stablecoins

[44:58] Energy, materials, and digital assets are Lee’s top sector picks for 2026.
[47:42]–[52:37] Discussion about crypto’s sudden weakness. Lee explains the massive deleveraging event (the largest in crypto’s history) and posits that risk appetite will recover after a “reset.”
[53:24]–[55:46] Lee discusses institutional embrace of blockchains (Fidelity, Standard Charter, UBS, Larry Fink), noting the real bullish case is increasingly for Ethereum.
[57:38] “Tether is now possibly one of the top-5 most profitable banking operations in the world.”

8. Macro Themes: Broadening, International Stocks, and Economic Shifts

[41:07]–[44:41] Breadth is returning—more stocks, more regions leading.
[44:23]–[44:41] International equity outperformance is likely a multi-year story, bolstered by capital market reforms and dollar weakness.

9. Robotics, Labor Shortages, and Economic Transformation

[66:30] Josh asks about the investment case in robotics as autonomy and automation move from hype to deployment.
[66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
Lee sees robots as a solution to structural labor shortages, with massive potential GDP and possibly even enough tax revenue to eliminate personal income taxes.

10. Social Implications and Optimism

[68:05] Lee envisions a world where robots, not people, are taxed.
[69:06] He draws parallels to prior technology-driven labor transitions, like farming after refrigerated transport, suggesting disruption will lead to a new era of prosperity.
[71:05] Acknowledges the need for social policy updates and hopes for a positive societal adaptation.

11. Granny Shots Update

[72:16] Tom Lee highlights the continued outperformance and growing assets in the “Granny Shots” strategy portfolios (now $4.8 billion total across three products).

Notable Quotes & Memorable Moments

[13:01] Tom Lee: “Don’t fight the Fed. And … demographics are destiny.”
[21:12] Tom Lee: "If this was a company and we threw six events that should wipe out the earnings power … but the company grew earnings, we would consider it super resilient and re-rate it higher."
[21:54] Josh Brown: "People have more faith in the earnings power of American companies than they have faith in any of our elected officials."
[41:16] Tom Lee: “This is confirming a broadening, is confirming a bull market. It's very good for institutional stock picking.”
[44:33] Tom Lee: “There could be a long tail to that story. The more I look at it, the like, the less I think it’s just a one year thing.” (on international equities)
[66:39] Tom Lee: “Robots are force multipliers; it makes every human a superhuman—or unemployed.”
[68:05] Tom Lee: “I think we could stop paying taxes because the robots are the ones that are taxed.”
[69:06] Tom Lee: “Every American today is gonna benefit from the surplus generated by robots.”

Important Timestamps

Overall Tone

Takeaways for Investors

Expect choppiness but not doom: Lee projects a mid-year correction, likely policy-driven, but expects a robust recovery and strong year overall.
Market resilience is real: Despite six market “black swans” since 2019, earnings and valuations have proven remarkably robust.
Breadth and sector rotation matter: Bullishness in "basic" materials, energy, and international stocks is anchored in mean-reversion and new leadership.
AI and robotics are real but disruptive: Not all beneficiaries are obvious and some, like software, may be “losers”—for now.
Crypto: short-term pain, long-term development: Recent deleveraging signals a possible bottom. Blockchains are quietly being adopted on Wall Street, especially Ethereum.
Society will need to adapt: Robotics could create surplus so large that old fears about economic displacement may be overblown—but only if policy evolves, too.

What Tom Lee's Worried About in 2026

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Summary

The Compound and Friends – "What Tom Lee's Worried About in 2026"

Episode Overview

Key Discussion Points and Insights

1. Market Outlook for 2026

2. What Fuels Lee’s Market Calls

3. Resilience and "Indestructibility" of the Market

4. Rotation and Breadth: Winners and Losers in Tech

5. Headwinds: Margin Debt and Policy Shock

6. Precious Metals and the Waning "Everything Bubble"

7. Crypto, Blockchain, and Stablecoins

8. Macro Themes: Broadening, International Stocks, and Economic Shifts

9. Robotics, Labor Shortages, and Economic Transformation

10. Social Implications and Optimism

11. Granny Shots Update

Notable Quotes & Memorable Moments

Important Timestamps

Overall Tone

Takeaways for Investors

Links

Summary

The Compound and Friends – "What Tom Lee's Worried About in 2026"

Episode Overview

Key Discussion Points and Insights

1. Market Outlook for 2026

2. What Fuels Lee’s Market Calls

3. Resilience and "Indestructibility" of the Market

4. Rotation and Breadth: Winners and Losers in Tech

5. Headwinds: Margin Debt and Policy Shock

6. Precious Metals and the Waning "Everything Bubble"

7. Crypto, Blockchain, and Stablecoins

8. Macro Themes: Broadening, International Stocks, and Economic Shifts

9. Robotics, Labor Shortages, and Economic Transformation

10. Social Implications and Optimism

11. Granny Shots Update

Notable Quotes & Memorable Moments

Important Timestamps

Overall Tone

Takeaways for Investors

Links