Tom Lee, co-founder of Fundstrat Global Advisors, was among the few voices on Wall Street last year who predicted a stock market rally while most of his peers saw a decline amid widespread expectations of a recession.
But he – and the American economy – proved that the pessimists were wrong. In fact, among Forecasters surveyed by BloombergLee’s call in 2023 turns out to be the most accurate.
This year, he is still setting his goals and succeeding in them. He said in early June The S&P 500 will reach 5,500 By the end of the month. By Friday’s close, it was at 5,464.62.
Now, he has a long-term forecast, and it’s a huge one: By the end of this decade, he told me, the S&P 500 could hit 15,000, a rise of more than 170%.
In the last episode of Bloomberg A strange lot Podcast, which was recorded on Tuesday, began by explaining his evidence-based approach to forecasting, which looks across history and across assets. The bond market is smarter than the stock market, he said: “That’s why they say stocks are the land of third-rate students.”
He also believes investors can’t fight the Fed and is focusing more on topics that will drive growth, such as how millennials will reshape the economy, the global labor shortage that will boost artificial intelligence and technology stocks, as well as energy security and cybersecurity. By selecting the strongest stocks within each theme, it has outperformed the market every year since 2019, Lee said.
He added that Wall Street usually underestimates the impact of new technologies, which are usually adopted by young people in their teens and twenties first, while most senior investment professionals are in their forties and fifties, noting that cell phones were initially dismissed as a… Games for the rich. . Something similar happens with artificial intelligence.
“The adoption rate of AI is amazing, but the use case is important because there is a labor shortage,” Lee said. “So, to me, I think it’s very likely that we’re underestimating the amount of revenue that all of these companies are going to generate.”
As demand for workers continues to outpace supply, artificial intelligence will become more important. By the end of the decade, it is estimated that the global labor shortage will equal 40 million workers, or the equivalent of about $3 trillion in wages. He explained that given that most automation comes from devices such as semiconductors, this means whoever supplies the chips could have $2 trillion in revenue.
Ultimately, technology will account for 40% to 50% of the global stock market’s weight, up from about 20% today, Lee said.
“In a normal world, if this were a normal cycle for the S&P that tracks demographics, I can provide a chart later, and the S&P would probably hit 15,000 by the end of the decade,” he said. “As you move to longer time frames, I think that’s probably where we’re moving toward.”
The stock market is already heavily focused on technology and artificial intelligence stocks, with Nvidia alone accounting for more than a third of the S&P 500’s gains this year. Meanwhile, Wall Street is scrambling to keep up with the market’s continued rise, with more analysts raising their year-end targets.
This uptrend and market concentration have raised concerns that the hype around artificial intelligence is a sign of a bubble about to burst. But Lee downplayed these concerns and pointed to key differences between previous bubbles such as the dot-com boom and bust.
He noted that Nvidia has a much greater competitive advantage than Cisco did during the early stages of the Internet boom. He added that unlike the dot-com bubble, there is a lack of overly hyped IPOs today.
Lee isn’t the only bull on Wall Street making bold predictions. Ed Yardeni was talking about another “Roaring Twenties” supercycle, and said the S&P 500 would jump to 6,000 by next year.
By the end of the decade, the stock index said It can reach 8000—Not as high as Lee’s estimates but still good enough for a 46% jump.