December got off to a rough start, but Tom Lee isn't backing down from his bullish call. The Fundstrat Global Advisors Managing Partner and CIO told CNBC he still expects the S&P 500 to rally to somewhere between 7,200 and 7,300 before 2024 wraps up. That's a pretty bold forecast considering the early month jitters.

The Liquidity Shift That Changes Everything

Here's where things get interesting. Lee points to a critical inflection point that many investors might be overlooking: the Federal Reserve just ended its quantitative tightening program. "Today is the day quantitative tightening ends," Lee said, marking the conclusion of a balance sheet reduction policy that's been weighing on markets since April 2022.

Why does this matter? Lee draws a compelling parallel to September 2019, the last time the Fed stopped QT. Back then, markets surged 17% within three weeks. That's not a typo. The liquidity dynamics shifted dramatically, and stocks loved it. Now add in the widely expected interest rate cut later this month, and you've got a complete reversal from monetary tightening to easing. That's the kind of backdrop that tends to fuel rallies.

The Inflation Story Weakens

On the economic front, Lee sees reasons for optimism rather than concern. The "inflation story has weakened," he argues, which gives the Fed cover to cut rates for constructive reasons—namely supporting a labor market that's "holding fine" despite recent data gaps.

Lee also thinks November's market turbulence was actually healthy. The deleveraging that washed through high-flying AI and crypto trades created what he calls a solid foundation for a year-end surge. Now he expects investors who got too cautious last month will be forced into "performance chasing" as seasonal tailwinds pick up. Translation: fund managers who fell behind their benchmarks will pile back in, potentially driving the S&P 500 up that 5% to 10%. "So, I think a 7,200 [to] 7,300 is likely for S&P," he said.

Bitcoin's Timeline Gets Extended

While Lee remains bullish on equities, he's adjusting his crypto forecast. Bitcoin (BTC) hasn't bounced back as quickly as he expected following the mid-October deleveraging. He now thinks the crypto market needs another week or two to fully "wash out" before mounting a sustained rally.

The upshot? Lee pushed his Bitcoin all-time high prediction from December to the end of January. He still expects new records, just on a slightly delayed timeline as the broader recovery in risk assets gains momentum.

Market Reality Check

The benchmark indices didn't exactly validate Lee's optimism on Monday. After advancing through all sessions in the previous shortened trading week, stocks stumbled on the first day of December.

The SPDR S&P 500 ETF Trust (SPY) closed down 0.46% at $680.27, while the Invesco QQQ Trust ETF (QQQ) fell 0.34% to $617.17, according to market data. These ETFs track the S&P 500 and Nasdaq 100 indices, respectively.

Futures for the S&P 500, Dow Jones, and Nasdaq 100 were trading lower on Tuesday as well, suggesting the December weakness wasn't just a one-day blip.

Still, Lee's track record of contrarian calls and his specific catalysts—the end of QT, expected rate cuts, and seasonal momentum—make his forecast worth watching. Whether the market cooperates with his 7,300 target remains to be seen, but the setup he's describing has historical precedent. Now we get to see if history rhymes.