Stock Market Outlook: S&P 500 Could Soar to 15,000 Points by Decade’s End

Fundstrat Global Advisors co-founder Tom Lee was one of the few voices on Wall Street last year predicting a stock market rise, while most of his peers saw a decline amid widespread expectations of a recession.

But he (and the American economy) proved the pessimists wrong. In fact, among forecasters surveyed by Bloomberg, Lee’s forecast for 2023 turned out to be the most accurate.

And this year, he’s still making his decisions and getting them right. In early June, he said the S&P 500 would hit 5,500 by the end of the month. At Friday’s close, he was at 5,464.62.

Now he has a longer-term forecast, and it’s huge: By the end of this decade, Lee said the S&P 500 could hit 15,000, which is an increase of more than 170%.

In a recent episode of Bloomberg odd lots In the podcast, which was recorded on Tuesday, he began by explaining his evidence-based forecasting approach, 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 C students.”

He also believes investors can’t fight the Federal Reserve and is focusing more on issues that will drive growth, such as how millennials are reshaping the economy, the global labor shortage that will boost technology and artificial intelligence stocks, as well such as energy security and cybersecurity. By picking the strongest stocks within each theme, it has outperformed the market every year since 2019, Lee said.

Wall Street often underestimates the impact of new technologies, which tend to be adopted first by younger people in their teens and 20s, while most top investment professionals are in their 40s and 50s, he added, noting that Mobile phones were initially dismissed as toys for the rich. . Something similar is happening with AI.

“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 how much revenue all of these companies are going to 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 equal 40 million workers, or about $3 trillion in wages. Given that most automation comes from hardware like semiconductors, that means whoever supplies the chips could have $2 trillion in revenue, she explained.

Over time, technology will account for 40% to 50% of the global stock market weighting, up from 20% now, 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 be at 15,000 by the end of the decade,” he said. “As we move toward longer periods of time, I think that’s where we’re probably headed.”

The stock market is already heavily concentrated 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 struggling to keep up with the relentless market rally, with more and more analysts raising their year-end targets.

Such optimism and market concentration have raised concerns that the AI ​​hype is a sign of a bubble about to burst. But Lee downplayed those concerns, pointing out 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 had during the early stages of the Internet boom. And unlike the dot-com bubble, there is a lack of overhyped IPOs today, he added.

Lee is not the only Wall Street bull making bold predictions. Ed Yardeni has been talking about another “Roaring 20s” supercycle and has said the S&P 500 would jump to 6,000 points 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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