7 reasons the S&P 500 could soar 7% from current levels by the end of this year, according to Fundstrat's Tom Lee

• Fundstrat's Thomas Lee upgraded the firm's S&P 500 price target to 4,600, a 7% increase from the benchmark index's closing price Tuesday.

• In a Wednesday note the head of research outlined seven reasons why the benchmark index could gain.
• The index has already gained 14% in the first half of 2021. History points to further gains for the rest of the year, Lee said.

Fundstrat's Tom Lee upgraded the firm's S&P 500 price target to 4,600, a 7% increase from the benchmark index's closing price Tuesday.

"The S&P 500 is on track to be up ~14% by mid-2021. As we wrote recently (and is obvious), these gains would be considered impressive for a full year, let alone 6 months," the head of research said in a Wednesday note. "In fact, since 1928, and ex-recessions (more impressive), this ranks as nearly one of the 10 best ever starts (technically would be #11)."

Lee laid out seven reasons why the S&P 500 could gain in the second half of 2021.

The first is that "strong markets stay strong." Based on historical data, the returns in the second half of the year are strongest when the first half of the year is strong. Since 1928, the second half of the year has seen a median return of 9% when the first half finished 13% or higher. The S&P 500 is currently up 14% for the first half of the year. Although history doesn't guarantee future returns, this could be a positive sign.

Lee also noted that the economy is gaining momentum, while credit is strong and rates are stable. Also, corporate operating leverage is just beginning, with many companies in the S&P 500 beating on earnings expectations in the first half of the year.

Additionally, the Federal Reserve has remained dovish and has promised to keep interest rates lower for longer and has not yet formally announced a decision to taper asset purchases. This accommodative stance will lead to a strong second half of the year, particularly with the addition of new fiscal stimulus from Washington.

Lastly, volatility is normalizing based on Fundstrat's metrics, which could be bullish for stocks.

Despite these factors, Lee emphasized that July could be a "brutal" month for stocks, as stock gains during that month historically lag behind even if the first half of the year is stellar. He also listed the delta coronavirus variant as a significant risk to his S&P 500 outlook.

However, potential choppiness in July won't stop the S&P 500 from hitting 4,600 by the end of the year, he said. Fundstrat's previous S&P 500 price target was 4,300.