The Wall Road strategist who nailed 2023’s inventory rally sees the S&P 500 hovering greater than 170% to fifteen,000 by finish of this decade

Fundstrat International Advisors cofounder Tom Lee was among the many few voices on Wall Road final 12 months who predicted a stock market surge whereas most of his friends noticed a droop amid widespread expectations for a recession.

However he—and the U.S. economic system—proved the doomsayers unsuitable. In reality, among the many forecasters surveyed by Bloomberg, Lee’s name in 2023 turned out to be the most accurate.

And this 12 months, he is nonetheless calling his photographs and nailing them. In early June, he stated the S&P 500 would hit 5,500 by the tip of the month. As of Friday’s shut, it was at 5,464.62.

Now, he is obtained a longer-term forecast, and it is a whopper: by the tip of this decade, Lee stated the S&P 500 might hit 15,000, representing upside of greater than 170%.

On a latest episode of Bloomberg’s Odd Lots podcast, which was recorded on Tuesday, he started by explaining his evidence-based method to forecasting, which appears to be like throughout historical past and throughout belongings. He stated the bond market is smarter than the inventory market: “That is why they are saying equities are the land of C college students.”

He additionally believes traders cannot combat the Federal Reserve and focuses extra on themes that may drive progress, similar to how millennials are reshaping the economic system, the worldwide labor scarcity that may enhance AI and tech shares, in addition to vitality safety and cybersecurity. By selecting the strongest shares inside every theme, he has outperformed the market yearly since 2019, Lee stated.

Wall Road usually underestimates the impression of latest applied sciences, that are often adopted first by youthful folks of their teenagers and 20s whereas most high funding professionals are of their 40s and 50s, he added, noting that cell telephones had been initially dismissed as toys for the wealthy. One thing related is occurring with AI.

“The adoption price of AI is staggering, however the use case is essential as a result of there is a labor scarcity,” Lee stated. “So to me, I believe it’s totally possible we’re underestimating how a lot income all these corporations will make.”

And because the demand for staff continues to outstrip provide, AI will develop into extra important. By finish of decade, he estimated the worldwide labor scarcity can be equal to 40 million staff, or about $3 trillion price of wages. Contemplating that almost all of automation is from {hardware} like semiconductors, meaning whoever is supplying the chips might need $2 trillion in income, he defined.

Ultimately, expertise will symbolize 40%-50% of worldwide inventory market weighting, up from about 20% at present, Lee stated.

“In a normalized world, if it is a regular S&P cycle following demographics, I might present a chart later, S&P must be doubtlessly 15,000 by the tip of the last decade,” he stated. “As you progress into longer timeframes, that is most likely the place I believe we’re transferring in the direction of.”

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The inventory market is already closely targeting tech and AI shares, with Nvidia alone accounting for more than a third of the S&P 500’s gains this 12 months. In the meantime, Wall Road is scrambling to maintain up with the market’s relentless rally, with more analysts raising their year-end targets.

Such bullishness and market focus have raised considerations that the AI hype is an indication of a bubble about to pop. However Lee downplayed these worries, pointing to key variations between earlier bubbles just like the dot-com growth and bust.

He famous that Nvidia has a a lot steeper aggressive benefit than Cisco did through the early levels of the web growth. And in contrast to the dot-com bubble, there’s a lack of overly hyped IPOs at present, he added.

Lee is not the one Wall Road bull making daring predictions. Ed Yardeni has been pounding the desk about one other “Roaring 20s” super-cycle and has stated the S&P 500 would jump to 6,000 by subsequent 12 months.

And by the tip of the last decade, he stated the inventory index could reach 8,000—not as excessive as Lee’s estimate however nonetheless adequate for a 46% bounce.

This story was initially featured on Fortune.com