Stock market outlook: S&P 500 could rise to fifteen,000 by the tip of the last decade

But he – and the US economy – have proven the doomsayers improper. Forecasters surveyed by BloombergLee’s prediction for 2023 turned out to be essentially the most accurate.

And this yr too, he’s sticking to his decisions and making them. At the start of June, he said that S&P 500 would reach 5,500 until the tip of the month. At the close of trading on Friday, the value was 5,464.62.

Now he has a longer-term forecast, and it’s fascinating: By the tip of this decade, Lee says, the S&P 500 could reach the 15,000 mark, which might correspond to an upside potential of over 170 percent.

In a recent episode of Bloomberg’s Restless podcastrecorded on Tuesday, he began by explaining his evidence-based approach to forecasting, which takes history and all assets under consideration. He said the bond market is smarter than the stock market: “That’s why they say stocks are the land of middle school students.”

He also believes investors cannot fight the Federal Reserve and is more focused on themes that drive growth, comparable to millennials reshaping the economy, the worldwide labor shortage that can boost AI and technology stocks, and energy security and cybersecurity. By picking the strongest stocks inside each theme, he has outperformed the market yearly since 2019, Lee said.

Wall Street tends to underestimate the impact of latest technologies, which are frequently first adopted by young people of their teens and 20s, while most top investment professionals are of their 40s and 50s, he added, noting that cellphones were initially dismissed as toys for the wealthy. Something similar is occurring with AI.

“The adoption rate of AI is staggering, but the use case is important because there is a labor shortage,” Lee said. “So I think we’re very likely underestimating how much revenue all these companies are going to make.”

And as demand for employees continues to outstrip supply, AI is becoming increasingly necessary. By the tip of the last decade, the worldwide labor shortage will equal 40 million employees, or about $3 trillion in wages, he estimated. Considering that the majority automation relies on hardware comparable to semiconductors, meaning the chip supplier could potentially make $2 trillion in revenue, he explained.

Ultimately, the technology sector will account for 40 to 50 percent of the worldwide stock market, in comparison with about 20 percent today, Lee said.

“In a normalized world, if this is a normal S&P cycle that follows demographics (I could provide a chart later), the S&P should be at 15,000 perhaps by the end of the decade,” he said. “If you look at longer time periods, that’s probably where we’re headed.”

The stock market is already heavily focused on technology and AI stocks, with Nvidia alone accounting for greater than a 3rd of the S&P 500’s gains this yr. Meanwhile, Wall Street is desperately attempting to sustain with the market’s unstoppable rally, and increasingly more analysts are raising their year-end targets.

This optimistic sentiment and market concentration have raised concerns that the hype around artificial intelligence is an indication of a bubble about to burst. But Lee downplayed those concerns, pointing to key differences between previous bubbles comparable to the dot-com boom and crash.

He noted that Nvidia has a much larger competitive advantage than Cisco did within the early days of the Internet boom. And unlike the dot-com bubble, there aren’t any overly hyped IPOs today, he added.

Lee is not the only Wall Street bull making daring predictions. Ed Yardeni has already talked up one other “Roaring Twenties” supercycle, saying the S&P 500 will hit 6,000 next yr.

And by the tip of the last decade, he said, the stock index could reach 8,000– not as high as Lee’s estimate, but still adequate for a 46% increase.