SUPERNEWS

Macro

Lee: S&P 500 Could Hit 5,700 on AI, Ozempic Boost

Tom Lee predicts S&P 500 could hit 5,700 by year-end, buoyed by rate cuts and megacap growth.

By Bill Bullington

ᐧ

4/12, 16:42 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
article-main-img

Key Takeaway

  • Tom Lee of Fundstrat predicts the S&P 500 could reach 5,700 by year-end, citing inflation normalization and potential Fed rate cuts.
  • Lee remains bullish on megacaps due to artificial intelligence and Ozempic, also sees value in small-caps and industrials.
  • Despite recent inflation-driven market selloffs, Lee believes equities will rise, driven by selective sector strength.

Inflation and Market Sentiments

Despite recent market selloffs attributed to inflationary pressures, Fundstrat's Tom Lee, the firm's head of research, maintains an optimistic outlook for equities, projecting that the S&P 500 could close the year significantly higher, potentially reaching 5,700. Lee suggests that the market's reaction to the latest economic data, particularly the Consumer Price Index (CPI) report, may be overly pessimistic. He argues that while the CPI report was disappointing, it was influenced by "stubborn components," indicating that inflation is on a path to normalization, albeit not immediately apparent in the aggregate data.

Federal Reserve's Role and Market Projections

Lee posits that even a single rate cut by the Federal Reserve within the year could bolster the stock market. This perspective hinges on the belief that the current inflationary trends are temporary and that the broader economic environment remains conducive to growth. His bullish stance is further supported by the potential of megacap companies, particularly those poised to benefit from advancements in artificial intelligence and the popularity of the Ozempic weight loss drug. Lee also highlights the appeal of small-cap stocks and industrial sectors, anticipating their growth in response to forthcoming interest rate cuts and improvements in manufacturing indicators, as evidenced by a positive turn in the ISM manufacturing report.

Investment Strategies Amidst Uncertainty

Amidst the backdrop of inflation concerns and market volatility, Lee advises investors to focus on sectors and companies showing resilience and growth potential. His bullish outlook on megacap names and specific sectors like artificial intelligence and healthcare, alongside a favorable view of small-cap and industrial stocks, suggests a strategic approach to navigating the current market dynamics. By prioritizing investments in areas expected to thrive despite broader economic uncertainties, Lee underscores the importance of selective investment in fostering portfolio growth.

Street Views

  • Tom Lee, Fundstrat (Bullish on equities):

    "The narrative got muddled because that CPI report was a disappointment. But it was driven by what we’d call stubborn components... Inflation is normalizing, it’s just not evident in the total picture."