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Stock Outlook: S&P 500 Could Hit 15,000 by End of Decade

Stock Outlook: S&P 500 Could Hit 15,000 by End of Decade
Stock Outlook: S&P 500 Could Hit 15,000 by End of Decade

 


Fundstrat Global Advisors co-founder Tom Lee was among the few voices on Wall Street last year to predict a rise in stock markets, when most of his peers saw a collapse amid widespread expectations of a recession.

But he and the American economy proved the prophets of doom wrong. In fact, among the forecasters interviewed by BloombergLees' call in 2023 proved the most accurate.

And this year, he continues to make his decisions and succeed in them. In early June, he declared that The S&P 500 would reach 5,500 At the end of the month. As of Friday's close, it was 5,464.62.

Now he has a longer-term prediction, and it's far-fetched: By the end of this decade, Lee said the S&P 500 could hit 15,000, which would be a rise of more than 170 percent.

In a recent episode of Bloomberg Odd lots 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 that investors can't fight the Federal Reserve and is focusing more on themes that will drive growth, such as how millennials are reshaping the economy, the global labor shortage that will boost values ​​of AI and technology, as well as energy security and cybersecurity. By selecting the strongest stocks in each theme, it has outperformed the market every year since 2019, Lee said.

Wall Street generally underestimates the impact of new technologies, which are typically adopted first by young people in their teens and 20s, while most of the most experienced investment professionals are in their 40s and 50s. he added, pointing out that cell phones were initially seen as toys for the rich. . Something similar is happening with AI.

The adoption rate 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 the revenue that all of these companies will generate.

And as demand for workers continues to outstrip supply, AI will become more critical. By the end of the decade, he estimates the global labor shortage will be equivalent to 40 million workers, or about $3 trillion in wages. Since most automation comes from hardware such as semiconductors, that means whoever supplies the chips could have a revenue of $2 trillion, he explained.

Eventually, technology will account for 40% to 50% of global stock market weighting, up from about 20% today, Lee said.

In a normalized world, if this is a normal S&P cycle following demographics, I can provide a chart later, the S&P should potentially be at 15,000 by the end of the decade, he said. -he declares. As you move into longer time frames, that's probably where we're heading, I think.

The stock market is already heavily focused on 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 scrambling to keep up with the markets' relentless rally, and more analysts are raising their year-end targets.

Such an uptrend and market concentration has led to fears that the hype around AI is a sign of a bubble about to burst. But Lee downplayed those concerns, pointing to key differences between previous bubbles, such as the boom and bust of dot-com companies.

He noted that Nvidia had a much greater competitive advantage than Cisco at the start of the Internet boom. And unlike during the dotcom bubble, today there is a lack of overly publicized IPOs, he added.

Lee isn't the only Wall Street bull making bold predictions. Ed Yardeni debated a new Roaring Twenties super-cycle and said the S&P 500 would rise to 6,000 by next year.

And at the end of the decade he declared that the stock index could reach 8,000not as high as Lees estimates but still enough for a 46% jump.

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