Four Charts Show Why Wall Street’s Most Optimistic Strategist Expects the Stock Market to Triple by 2030

• Fundstrat’s Tom Lee expects the S&P 500 to reach a high of 15,000 in 2030.

• Demographic trends, millennial spending habits and technological advancements will be the key drivers.

• Here are the four charts that show why Lee is so optimistic about 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 this S&P500 reaching the top 15,000 by the end of the decade. The index was trading around 5,630 on Friday.

“If this is a normal S&P cycle, following the demographics…S&P should potentially be 15,000 by the end of the decade. To me, if you go to a longer time frame, that’s probably where we’re going, Lee said.

In the interview, Lee said he looked at a handful of charts that support his bullish long-term forecast.

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

1. Thanks, millennials

Lee put together the above diagram several years ago, but his premise remains the same. The average age of millennials is now around 31, and the global cohort of 2.5 billion people is starting to reach its prime age range of 30 to 50.

“This would be the third time stocks have entered a cycle where annual returns rise in the high teens. You had the roaring twenties, and then the fifties to the late sixties, and this is a third cycle,” Lee told CNBC last month. .

“They all coincided with a rise 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 driven by millennials and Gen Z.”

“It’s a demand story. When you reach your peak years, 30-50, Urban Institute shows that you start borrowing more money, you make important life decisions, this is what drives the economy.”

2. Stock market peaks and demographic developments

The stock market has a history of peaking around the same time a population reaches its peak age of about 50, because 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 was at its prime. This happened around the same time as a painful stock market correction of about 35% that lasted for years.

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

The story continues

The average millennial won’t reach their peak age until 2038, which Lee says suggests plenty of upside potential for the stock market between now and then.

3. Technology will address a global labor shortage

According to Lee, spending on technology will soar in the coming years as the world grapples with a growing labor shortage.

“We have a really big opportunity for US tech companies because of AI, which is providing the global digital labor, because there’s a global labor shortage. So those two forces are combining to generate, I think, almost a decade of exceptionally good stock returns,” he says. Lee said.

“I think a lot of dollars are going to be spent on American technology products because the world is going to be short 80 million workers by the end of this decade. That’s roughly $3 trillion in labor wages being converted into silicon, so that means American suppliers of silicon and AI will have a revenue revenue of $3 trillion.”

4. Money will flow into US tech stocks

As more companies spend trillions of dollars on technology to address the global labor shortage, the technology sector will make up 50% of the S&P 500.

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

“If US companies grow earnings at this rate, the US price-to-earnings ratio should increase. There will be capital flows to the US. Where else in the world can you find the best and most important technology companies, they are actually all in America,” said Lee.

Read the original article Business insider