Usually bullish Tom Lee issues mea culpa on missing this rally, but is still waiting to buy

Tom Lee
Adam Jeffery | CNBC

Equity strategist Tom Lee issued a mea culpa on Friday, telling investors that "animal spirits" have lifted equity prices well beyond what he anticipated earlier in the year.

"Only two months into 2017, the S&P 500 has soared 7%, vastly outperforming our expectations for a 'flat to down' 1H [first half]— in short, we have been steamrolled," he wrote in a research note. "Our 1H caution was predicated on a flattening yield curve and typical 'payback' seen in post-Presidential election years. But we underestimated the positive impact that a surge in 'animal spirits' to drive equity ETF inflows (4X pace of 2016) and therefore equity upside."

Earlier in the year, Lee, who was correctly bullish on stocks last year, became the most bearish soothsayer on Wall Street, issuing a 12-month price target of 2,275 for the S&P 500, or about 4.5 percent lower from its current level.

"We have 'egg on our face' but still wait for a better entry point," he said.