Wall Street strategist sees S&P 500 rise to 15,000
Fundstrat Global Advisors co-founder Tom Lee was among the few voices on Wall Street last year predicting a stock market rise while most of his colleagues saw a decline amid widespread expectations of a recession. Now he says he sees the S&P 500 rising to 15,000.
But he – and the US economy – proved the doomsayers wrong. In fact, among the forecasters surveyed by Bloomberg, Lee’s 2023 forecasts proved to be the most accurate.
And this year he is still hitting his shots and nailing them. In early June, he said the S&P 500 would reach 5,500 by the end of the month. At the close of June, the index stood at 5,464.62.
Now he has a long-term forecast, and it’s great: Lee said that by the end of this decade, the S&P 500 would rise to 15,000, representing an upside of more than 170%.
In an episode of Bloomberg’s Odd Lots podcast, recorded on Tuesday, he began by explaining his evidence-based approach to forecasting, which looks across history and across assets. He said the bond market is smarter than the stock market: “That’s why they say stocks are the land of the C-students.”
He also believes investors can’t fight the Federal Reserve and are focusing more on themes that will drive growth, such as how millennials are reshaping the economy, the global labor shortage that will boost AI and technology stocks, as well as energy security and cybersecurity. By picking the strongest stocks in each theme, he has outperformed the market every year since 2019, Lee said.
Wall Street typically underestimates the impact of new technologies, which are usually embraced first by younger people in their teens and 20s while most top investment professionals are in their 40s and 50s, he added, noting that cell phones were initially dismissed as toys for the rich. Something similar happens with AI.
“The rate of adoption of AI is staggering, 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 how much revenue all these companies will make.”
And as demand for workers continues to outstrip supply, AI will become more critical. By the end of the decade, he estimated that the global labor shortage will be equivalent to 40 million workers, or about $3 trillion in wages. Given that most of the automation comes from hardware like semiconductors, that means whoever supplies the chips could have $2 trillion in revenue, he explained.
Eventually, technology will represent 40-50% of the global stock market’s weighting, up from around 20% today, Lee said.
“In a normalized world, if this is a normal S&P cycle by demographics, I could provide a chart later, the S&P should be potentially 15,000 by the end of the decade,” he said. “As you go into longer time frames, that’s probably where I think we’re headed.”
The stock market is already heavily concentrated in tech and AI stocks, with Nvidia alone accounting for more than a third of the S&P 500’s gains this year. Meanwhile, Wall Street is struggling to keep up with the market’s relentless rally, with more analysts raising their year-end targets.
Such bullishness and market concentration have raised concerns that the AI hype is a sign of a bubble about to pop. But Lee downplayed these concerns, pointing to key differences between past bubbles such as the dot-com boom and the bust.
He noted that Nvidia has a much steeper competitive advantage than Cisco had during the early stages of the internet boom. And unlike the dot-com bubble, there is a lack of over-hyped IPOs today, he added.
Lee isn’t the only Wall Street bull making bold predictions. Ed Yardeni has pounded the table on yet another “Roaring 20s” supercycle, saying the S&P 500 would jump to 6,000 next year.
And by the end of the decade, he said the stock index could reach 8,000 – not as high as Lee’s estimate but still good enough for a 46% jump.
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