During an interview with CNBC on Friday, Lee pointed to a lack of conviction among investors until after Nov. 3, with the Nasdaq facing a sharp sell-off.
- Lee said Friday’s market action looked different from previous sell-offs, with some investors potentially being forced to sell while money continues to move into other parts of the market.
- The bigger issue, according to Lee, is that institutional investors are waiting for greater clarity around the midterm elections.
- Lee said the uncertainty could also be keeping some retail investors on the sidelines.
Fundstrat Managing Partner Tom Lee says investors are holding back from buying into the latest stock-market dip as they await the outcome of next week’s U.S. midterm elections.
During an interview with CNBC on Friday, Lee pointed to a lack of conviction among investors until after Nov. 3, with the Nasdaq facing a sharp sell-off.
Tom Lee Says Investors Are Waiting Until November 3
Lee said Friday’s market action looked different from previous sell-offs, with some investors potentially being forced to sell while money continues to move into other parts of the market.
“Today looks like someone’s getting liquidated,” Lee said, adding that he could not determine whether the selling was coming from institutions or from investors holding heavily concentrated positions in stocks that were falling sharply.
“But at the same time, the equal weight market is rising. So I think there still is plenty of money sloshing around,” he said.
The bigger issue, according to Lee, is that institutional investors are waiting for greater clarity around the midterm elections.
“Our institutional investors just don’t have conviction until after midterm,” Lee said, while adding that he expects that to limit dip-buying in the days ahead.
“So I think between now and November 3rd, it doesn’t take a lot for stocks to fall a lot, because I just don’t know if there’s as much dip buying conviction until after November 3rd,” Lee said.
‘People Are Marking Their Calendar’
Lee said the uncertainty could also be keeping some retail investors on the sidelines.
“Yes,” Lee said when asked whether investors could be waiting to see how the elections shake out. “Because I think there’s a lot of doom-saying about the midterms.”
He pointed to the high stakes investors are placing on the election and said that could make them reluctant to buy stocks even after the recent declines.
“I do think a lot of people are kind of hesitant, hesitant to say, I want to buy this dip at this moment,” Lee said.
He believes investors still intend to buy the dip, but are waiting for the election to pass.
“I think people are going to plan to buy the dip,” Lee said. “But as strange as it sounds, I think people are marking their calendar until November 3rd.”
Lee’s comments came after the tech-heavy Nasdaq 100 fell 3.5% Friday, with the index registering its worst month since March 2025. The Nasdaq 100 index ended October with a decline of 6.65%, its worst month since March 2025 when it fell 7.69%.
ING Sees Three Areas to Watch After the Election
Analysts at ING Think argued that the immediate market reaction to the midterms may not tell the whole story, identifying the Middle East, AI and fiscal policy and tariffs as three areas to watch afterward.
On the Middle East, ING said a divided or Democrat-controlled Congress could create competing pressures for President Donald Trump, while gridlock could increase the importance of areas where the White House has greater executive authority, including foreign policy.
AI could become another increasingly important political issue. ING pointed to growing voter concerns about the rapid construction of data centers and argued that the midterms could provide an indication of how contentious the AI infrastructure buildout becomes ahead of the 2028 presidential election.
The third area is fiscal policy and tariffs. ING said the U.S. deficit remains around 6% of GDP and argued that a divided government makes meaningful fiscal consolidation less likely. At the same time, trade policy remains an area where the president can act without Congress.
The firm added that for markets, Nov. 3 could be less about an immediate verdict and more about what the election changes, or fails to change, in the months that follow.
During the after-hours session on Friday, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, declined 1.77%; the Invesco QQQ Trust ETF (QQQ) fell 3.47%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) closed lower by 1.07%. Retail sentiment on Stocktwits toward the S&P 500 ETF was in the ‘bullish’ territory at the time of writing.
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