Tom Lee forecasts that the market will start 2026 with "difficulties" before recovering at the end of the year.

Tom Lee, Fundstrat’s Chief Research Officer, has issued a warning to investors: prepare for a “painful downturn” in the cryptocurrency and stock markets in 2026, driven by geopolitical tensions, before the markets can recover by the end of the year.

In an interview with The Master Investor podcast hosted by Wilfred Frost, Lee predicts that 2026 will follow the trend of 2025, with positive momentum from the blockchain and artificial intelligence (AI) sectors. However, risks related to tariffs and political polarization will hinder the market, making a sustainable rally unlikely to occur immediately.

He forecasts that the stock market will experience a correction of 15% to 20% this year but remains optimistic, stating: “I believe we will end the year strongly,” thanks to the more accommodative monetary policy of the US Federal Reserve (Fed) and the end of last year’s quantitative tightening.

Additionally, Lee believes that the White House’s choice of “sides” will significantly impact the leading sectors of the market this year.

Regarding Bitcoin (BTC), Lee still expects the cryptocurrency to set a new all-time high this year, though he did not reiterate his previous prediction of $250,000.

Lee believes deleveraging has harmed the cryptocurrency market

He states that reaching a new peak for Bitcoin will be a significant milestone, indicating that the market has truly moved past the shock of October 10, when approximately $20 billion in leveraged positions were wiped out:

“2026 will be a very important test because if Bitcoin establishes a new high, we can confidently say that deleveraging is behind us.”

He also explains that the recent divergence between cryptocurrencies and gold partly stems from deleveraging cycles, which frequently shake up the market and severely impact market makers—whom Lee refers to as “the central banks of cryptocurrency.”

Lee emphasizes that until cryptocurrencies are more widely accepted and receive strong backing from major financial institutions, these fluctuations will continue to affect market stability.

Analysts believe metals may outperform cryptocurrencies again in 2026

Lee assesses that energy and basic materials will be standout sectors in 2026, and recommends adding gold to investment portfolios.

Benjamin Cowen, CEO of Into The Cryptoverse, agrees with this trend, stating: “Metals outperformed digital assets in 2025 and are likely to maintain that position in 2026.”

However, unlike Lee, Cowen predicts that metals will face a “significant correction at the end of this year,” a time when cryptocurrencies could decline even further.

“Trade with the market you have, not the market you wish for.”

Mr. Giáo