Fundstrat Global Advisors co-founder Tom Lee was among the few on Wall Street last year to predict the stock market would rise while most of his peers saw a decline amid widespread expectations of a recession.
But he—and the U.S. economy—proved the pessimists wrong. In fact, among Forecasters surveyed by BloombergLee’s call in 2023 was the most accurate.
And this year he is still doing his best and achieving success. At the beginning of June he announced that The S&P 500 will reach 5500. by the end of the month. It stood at 5,464.62 as of Friday’s close.
Now he has a long-term forecast, and it’s stunning: By the end of this decade, Lee says, the S&P 500 could reach 15,000, representing more than 170% upside potential.
In a recent episode Bloomberg Odd lots podcast, which was recorded on Tuesday, he began by explaining his science-based approach to forecasting, which looks at history and assets. He said the bond market is smarter than the stock market: “That’s why they say stocks are the land of the overachievers.”
He also believes investors can’t fight the Federal Reserve and is focusing more on topics that will drive growth, such as how millennials are changing the economy, the global labor shortage that will boost AI and tech stocks, and also energy security and cybersecurity. By picking the strongest stocks on each theme, Lee says he has outperformed the market every year since 2019.
Wall Street typically underestimates the impact of new technologies, which are typically first adopted by young 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 is happening with AI.
“The pace of AI adoption is staggering, but the use case is important because there is a labor shortage,” Lee said. “So I think it’s very likely that we’re underestimating the revenue that all of these companies will receive.”
And as labor demand continues to outstrip supply, AI will become more important. He estimates that by the end of the decade, the global labor shortage will be equivalent to 40 million workers, or about $3 trillion in wages. Given that most automation is done through hardware such as semiconductors, this means whoever supplies the chips could have a $2 trillion revenue, he explained.
Ultimately, technology will account for 40-50% of the global stock market, up from 20% today, Lee said.
“In a normalized world, if this is a normal S&P cycle following demographics, I could provide a chart later, the S&P should potentially hit 15,000 by the end of the decade,” he said. “As you move to longer periods of time, I think that’s where we’re heading.”
The stock market is already heavily concentrated in technology and artificial intelligence stocks, with Nvidia alone accounting for more than a third of S&P 500 gains this year. Meanwhile, Wall Street is struggling to keep up with the market’s relentless rally as more analysts raise their year-end forecasts.
This optimism and market concentration have raised concerns that the AI hype is a sign that a bubble is about to burst. But Lee played down those concerns, pointing out key differences between previous bubbles such as the dot-com boom and bust.
He noted that Nvidia has a much stronger competitive advantage than Cisco in the early stages of the Internet boom. And unlike the dot-com bubble, there is a dearth of overhyped IPOs today, he added.
Lee isn’t the only Wall Street bull making bold predictions. Ed Yardeni discussed another Roaring ’20s super cycle and said the S&P 500 will jump to 6,000 by next year.
And by the end of the decade, he said, the stock index can reach 8000— not as high as Lee had predicted, but still enough for a 46% jump.