4 Charts Show Why Wall Street’s Most Bullish Strategist Expects Stock Market to Triple by 2030

• Fundstrat’s Tom Lee expects the S&P 500 to reach 15,000 by 2030.

• Demographic trends, millennial spending habits and technological advances will be key factors.

• Here are the four charts that show why Lee is so bullish on the stock market.

Fundstrat’s Tom Lee raised eyebrows last month when he made an extremely bullish prediction: The S&P 500 will nearly triple by 2030.

In an interview with Bloomberg’s Odd Lots, Lee said he expects the S&P 500 to reach 15,000 by the end of the decade. The index closed last week around 5,555.

“If this is a normal S&P cycle following the demographics … the S&P should potentially be 15,000 by the end of the decade. To me, as you go into a longer time frame, probably, probably, I think we’re headed our way,” Lee said.

In the interview, Lee said he’s looking at a handful of charts that support his bullish long-term prediction.

Here are the four charts Lee shared with Business Insider that show why the already bullish forecaster is so bullish on the stock market.

1. Thank you, millennials

Lee put together the chart above several years ago, but his thesis remains the same. The average age of millennials is now around 31, and the global cohort of 2.5 billion people is starting to enter their prime 30-50 years.

“It would be the third time stocks have entered a cycle where annual returns have worsened into the teens. You had the great 20s, then you had the 50s to the late 60s, and this is the third cycle,” Lee told CNBC last month. .

“They’ve all coincided with an increase in the number of people between the ages of 30 and 50, so in other words, the number of prime-age adults, and this time it’s fueled by millennials and Generation Z.”

“It’s a demand story. When you get to your peak years, 30-50, the Urban Institute shows you start borrowing more money, making big life decisions, that’s what drives the economy.”

2. Stock market peaks and demographics

The stock market has a history of peaking at exactly the same time a population reaches its peak age of about 50, as they are closer to retirement and often spend less money.

For example, when the Greatest Generation peaked in 1930, it coincided with a multi-year bear market in stocks.

Fast forward to 1974 when the silent generation came of age. This happened around the same time as a painful stock market correction of about 35% that lasted for years.

And the baby boomer peak was in 1999, just a year before the multi-year bear market hit stocks.

The story continues

The average millennial won’t reach prime age until 2038, which suggests plenty of upside for the stock market between now and then, according to Lee.

3. Technology will address a global labor shortage

According to Lee, spending on technology will increase in the coming years as the world faces a growing labor shortage.

“We have a huge opportunity for US tech companies because of artificial intelligence, which provides a global digital workforce, because there is a global labor shortage. So those two forces combine to deliver, I think, almost a decade of extraordinarily good stock returns.” Lee said.

“I think there’s going to be a lot of dollars spent on U.S. tech products because the world has 80 million workers by the end of this decade, that’s about $3 trillion of labor wages going into silicon, so that means suppliers Americans in silicon and artificial intelligence will have a $3 trillion revenue rate.”

4. Money will flow into US tech stocks

As more companies spend trillions of dollars on technology to address the global labor shortage, this will catapult the tech sector to account for 50% of the S&P 500.

The information technology sector currently represents about 30% of the index.

“If US companies grow earnings at this rate, the US P/E multiple should rise. There will be capital flows to the US. Where else in the world do you find the best and biggest tech companies, they’re practically all in America,” Lee said.

This story was originally published in July 2024.

Read the original article on Business Insider