Tom Lee, co-founder and research director of Fundstrat Global Advisors, a US investment firm, has made an extremely optimistic prediction: the S&P 500 index will surpass 15000 points by 2030.
As of the close of last Friday's US stock market, the S&P 500 index rose 0.55% to 5615.35 points.
Lee said in a recent interview, "If this is a normal cycle for the S&P index to follow population structure... by the end of this decade, the index should reach 15000 points
Here are four charts he shared, explaining why he is so bullish on the stock market.
1. Thanks to the millennial generation
He pointed out that the average age of the millennial generation is now around 31 years old, and the global population of 2.5 billion is beginning to enter the golden age of 30-50 years old.
He said, "This will be the third time that the US stock market has entered a cycle with an annual return rate of over ten times. You experienced the prosperity of the 1920s, followed by the 1950s to the late 1960s, which is the third cycle
These cycles all coincide with a surge in the number of adults aged 30-50, in other words, a surge in the number of golden age adults, and this time driven by millennials and Generation Z, "he added.
2. Stock market peak and demographic data
From a historical perspective, when the population reaches its peak at around 50 years old, the stock market also peaks as they approach retirement age and typically reduce spending.
For example, when the greatest generation reached its peak in 1930, it coincided with a bear market that had lasted for many years in the stock market; Fast forward to 1974, when the 'Silent Generation' reached its peak, and the US stock market also experienced a painful pullback of about 35% that lasted for several years; The baby boomer generation reached its peak in 1999, and just one year later, the stock market fell into a bear market that lasted for several years.
Lee said that the millennial generation will not reach their peak until 2038, which means there is still a lot of room for the stock market to rise from now until then.
3. Technology will solve the global labor shortage problem
Lee stated that as the global labor shortage problem becomes increasingly severe, technology spending will increase significantly in the coming years.
He said, "Due to the global labor shortage, artificial intelligence is providing digital labor for the world, which is a huge opportunity for American technology companies. So I believe that the combination of these two forces has driven high returns in the stock market over the past decade
I think there will be a lot of dollars spent on technology products in the United States, because by the end of this decade, the world will lack 80 million workers, which means about $3 trillion in labor wages will be converted into 'technology', so this means that American technology and artificial intelligence suppliers will have $3 trillion in revenue, "he added.
4. Funds will flow into US technology stocks
As more and more companies invest trillions of dollars in technology to address global labor shortages, this will drive the tech sector to reach 50% of the S&P 500 index. The technology sector currently accounts for about 30% of the index.
If the profits of American companies grow at this rate, the price to earnings ratio of the United States should rise. Capital will flow into the United States. Can you still find the best and most important technology companies in other parts of the world? They are basically all in the United States, "he said.