Source: Jin10 Data
The 'Wall Street wizard' shared four charts to support his long-term call prediction.
Last month, co-founder of Fundstrat Tom Lee made an extremely bullish prediction for US stocks: by 2030, the S&P 500 index is expected to nearly double. This prediction has garnered widespread attention. He has gained fame for accurately predicting the rise of the US stock market since last year, and has been dubbed the 'Wall Street Oracle'
Lee said in an interview with Bloomberg's Odd Lots that he expects the S&P 500 index to break the 15,000 mark at the end of this decade. The trading price of the index last Friday was about 5630 points.
Lee said, 'If this is a normal cycle, as the demographics change..., the S&P 500 index should be able to reach 15,000 by the end of this decade. For me, when we enter a longer time frame, I think the market may move in that direction.'
In the interview, Lee shared four charts that show why this already optimistic predictor remains bullish on the stock market.
1. Thanks to the Millennials.
Lee drew up the following chart several years ago, but his argument remains the same. The average age of the millennial generation is currently about 31 years old, and the global population of 2.5 billion is beginning to enter the golden age range of 30-50 years old.
He said, 'This will be the third cycle for US stocks to enter a period of annual compound rate of return as high as ten times. First, it was the roaring 20s of the last century, then the late 1950s to the end of the 1960s, and now the third cycle is happening'.
'All these cycles coincide with the surge in the number of people aged 30-50, in other words, the surge in the number of adults in the golden age, which is driven by the millennial generation and Gen Z,' he added.
What Lee describes is a story about demand. 'The data shows that when people enter their golden age of 30-50, they will start borrowing more money and make major life decisions. This is the driving force of the economy.'
2. The stock market peak and demographics.
Historically, the stock market peaks when the population reaches the age of about 50, because they are closer to retirement and typically spend less money.
For example, when the greatest generation reached their prime in 1930, the stock market experienced a bear market for years. Fast forward to 1974, the silent generation reached their prime, at the same time, the stock market also experienced a painful adjustment of about 35% for several years. The baby boomer generation reached its prime in 1999, which was the year before the stock market suffered years of bear market losses.
According to the average age of the millennial generation, Lee said that they will not reach their prime peak until 2038, which means there is still plenty of room for the stock market to rise until then.
3. Technology will solve the global labor shortage problem.
Lee believes that as the world faces an increasingly serious labor shortage, technology spending will skyrocket in the next few years.
'AI has brought great opportunities for US technology companies, because there is a labor shortage around the world and AI is providing digital labor worldwide. Therefore, the combination of these two forces, I think, will provide impetus for the generous return on stocks in the next decade'.
In Lee's view, there will be a lot of dollars spent on US technology products in the future because by the end of this decade, the world will be short of 80 million workers, which means that about $3 trillion in labor wages will be transformed into technology spending, which means that US technology firms and AI suppliers will have $3 trillion in revenue.
4. Funds will flow into US technology stocks.
Lee pointed out that as more and more companies invest trillions of dollars in technology to solve the global labor shortage problem, the proportion of technology industry in the S&P 500 index will reach 50%, while the current proportion is about 30%.
'If US corporate earnings grow at this rate, the P/E ratio of the US stock market should rise. Capital will flow into the US. Where else in the world can you find the best, most important technology companies? They're basically all in the United States,' said Lee.
