Fundstrat’s Managing Partner and Head of Research Tom Lee became finance-famous in 2020 and 2021 when he correctly called for an “everything rally” in equities, with a core focus on the energy sector. While some disparaged Lee’s prediction, it ultimately came true — the S&P reached Tom Lee’s year-end price target of 4,800 almost to the penny, and the energy sector performed better than any other throughout the year.
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While Tom Lee’s 2021 outlook made many think of Tom Lee as the “most bullish analyst on the street”, Lee’s outlook on 2022 was actually considerably different, with far more nuance. And it was shockingly accurate.
Tom Lee’s Prediction For the First Half of 2022 — Treacherous (Other Than for Energy)
At the end of 2021, Tom Lee gave his full 2022 year outlook, describing the first half as treacherous.
I think it’s going to be a much tougher year than 2021, and one of the reasons is you have the midterm elections. You’ve got the Fed raising rates and liftoff, and it looks like it’s going to happen before the middle of the year, and you still have the lingering issues of the supply chain and inflation and Covid. I think it’s easily flat or down in the first half.
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That prediction proved to be dead-on accurate. The S&P 500 was indeed treacherous, starting with a January sell-off that raged on for months, generating high volatility as Tom’s catalysts (Fed raising rates, midterm elections, supply chain pain, inflationary headwinds) played out.
And as predicted, one of the only sectors to end the first half in the positive was energy — helped in part by the shock of 2022, the Russian invasion of Ukraine.
In short: Tom Lee has been right about the market again, and again. And if he’s right about the last half of 2022, we’re in store for a massive shift in sentiment.
Tom Lee’s Prediction For the Second Half of 2022 — S&P Above 4,800 by EOY
Tom Lee says the bottom is in, and the market is set to rally ahead from here. Tom broke down his case in a CNBC interview earlier this week.
“If we end up with a growth scare, [...] economic activity is softening up, but the underlying fundamentals are strong enough for us not to have a recession — well that, along with the fact that inflation [that] is cooling pretty rapidly [...] That puts the Fed in a position to stop shocking markets. They don’t have to pivot, they don’t have to cut rates. But we can just say, ‘Look, if the 10-year stays here at 2.7, even at 3.0, that’s a 30 PE for a bond — then the stock market can rerate.’
So I think a lot of the reason stocks can surprise — which is what happened in 1982 — is that the multiple reaches a new equilibrium. The Fed is no longer shockling, we’re avoiding a recession, the 10-year is going to be how we calibrate PE. That PE of 20 is not expensive if the bond market is somewhere between 33 and 37 times. Today, if you buy a 10-year bond at 2.7, you’re paying almost 37-times for that coupon.
Tom went on to add that he still believes most companies can generate double-digit earnings growth in this environment.
So the question now is: Will Tom Lee be right yet again? And where should investors look to put their money for the maximum return? You can find out straight from the source this September — at Market Rebellion’s RebelCon, held in Dallas, Texas. Tom Lee, as well as his chief market technician Mark Newton will be attending and speaking at the event, alongside many other figures of finance fame. Limited tickets remain. Visit the website for more information about how you can lock in your spot!
