Tom Lee says there were five big reasons why markets stumbled. He has familiar advice.

By Barbara Kollmeyer Lee says investors should buy the dip Stocks have had a tough week, but dip buyers should start getting busy, says Fundstrat's Tom Lee. The stock market is likely "closer to the bottom," after Thursday's washout, and investors should buy the dip, says Wall Street's prescient and biggest bull, Tom Lee. "We still favor Mag 7, AI and crypto, the industrials, financials and small-caps," the head of research at Fundstrat told clients in a note that published early Friday. The S&P 500 SPX logged its biggest intraday reversal since April 8 as doubts over the AI trade got a reboot following Nvidia (NVDA) earnings that were initially well received. The S&P 500's 2025 gains now stands at 11%. Lee said Thursday's decline resembles the big market pullback of Oct. 10, and the market recouped after that. Lee said that the next two weeks could be choppy, before giving way to a rebound. The strategist has forecasted the S&P 500 could reach 7,000 by year-end, provided certain conditions are met. He said Thursday "was disappointing because Nvidia had great numbers," offering five other reasons for the overall stock-market reversal. Lee first pointed to social-media posts from President Donald Trump over a report alleging Democratic lawmakers were instructing members of the military to refuse unlawful orders. Calling that "seditious behavior from traitors," he later posted: "Seditious behavior, punishable by death." "That didn't sit well with many members of Congress," and "rattled markets a bit," he said. Another factor was concerns over potential revelations from the Epstein Files Transparency Act, which Trump signed into law on Wednesday. Lee said some worry billionaire donors could be named, such as a political leader or a "famous" market name. "It might be someone in the markets that's liquidating their positions," he said. Bitcoin (BTCUSD) was the third driver of the meltdown, said Lee. The No. 1 crypto dropped to $86,010 on Thursday, the lowest intraday level since April 21, according to Dow Jones Market Data. It continued to slide on Friday, even as U.S. stock futures (ES00) (YM00) (NQ00) posted gains, trading around $83,672. "Bitcoin peaked on Oct. 10. We know that peak had to do with a crypto liquidation event, but it's been bleeding lower since. And the S&P 500 peaked on Oct. 29," roughly three weeks later, said Lee, who is also chair of BitMine Immersion Technologies (BMNR), an Ethereum (ETHUSD) treasury company and bitcoin miner. He suggests investors monitor the biggest corporate holder of bitcoin, Strategy (MSTR)- formerly known as MicroStrategy - which has been acting as a leading indicator for the stock market. Lee said a driver for crypto weakness seems to be caused by ongoing stress for a couple of market makers. He told CNBC on Thursday that the crypto market has been "limping along" since its sharp pullback Oct. 10, which "really crippled" market makers of crypto. "Market makers are critical in crypto because they provide liquidity. They act almost as the central bank in crypto, and if they've got a hole in their balance sheet that they need to raise capital for, they need to reflexively reduce their balance sheet, reduce trading and if prices fall, they have to do more selling," he said. Lee said the "drip" lower for the last few weeks in crypto is reflecting the damage done to these market makers. He said in 2022 it took six to eight weeks for crypto market makers to recapitalize, and "we're six weeks into this process." Read: Wall Street's biggest bull reveals what investors got wrong this year - and what's ahead for stocks and crypto Oracle (ORCL) was the fourth trigger, owing to "exploding" credit-default swaps - a measure of default risk. Some people are theorizing that Oracle is being used as a hedge for AI, which remains to be seen, but is upsetting investors anyway, he said. The Cboe Volatility Index VIX, also known as the fear index, was the final culprit as it plunged Thursday morning, but surged to 28, a one-month high, Lee noted. -Barbara Kollmeyer This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal. (END) Dow Jones Newswires 11-21-25 0524ET