- Fundstrat’s Tom Lee was on the money about the S&P 500 this year while recession alarmists cried wolf.
- Now Lee is expecting earnings in 2020 to grow by double-digits, at least.
- The last six months of the year are historically bullish in the stock market.
Recession alarmists may have chuckled when stock market bull Tom Lee predicted 3,125 for the S&P 500 by year-end, but with the index inching closer to that level and trading at a record high of 3,066, who’s laughing now? Lee deserves to take a well-earned victory lap after correctly predicting that stocks had not reached a top and, in fact, the well-rested bulls were just warming up.
Now Lee is looking toward 2020, and he has another bullish forecast. This time the Fundstrat Co-Founder says that earnings are poised to grow by double-digits, according to a visit he made to CNBC. This might not seem like a big deal, but earnings have been in the doldrums after three-straight quarters of declines. So for corporate America to not only stage a comeback but also do so in style might seem like a long shot, but these are particularly the odds that Lee seems to thrive by. He said:
“I think next year earnings growth will actually be more than double digits.”
Lee points to sectors of the economy that don’t really have anywhere to go but up, including industrial, basic materials, and energy, all of which he points out “have been whiffing for more than a year.”
It hasn’t been smooth sailing for the stock market or the economy all year, and it’s understandable that the doomsayers would choose to believe the glass-half-empty perspective. But the latest economic data suggest that the U.S. has entered a Goldilocks economy – not too hot, not too cold – with inflation at bay and a recession nowhere in sight. And that has given investors something to cheer.
Meanwhile, as LPL Financial Senior Market Strategist Ryan Detrick points out, the stock market has history on its side. For the past decade, the second half of the year has been bullish nearly 100% of the time with average returns of 8.8%.
Despite all of this optimism, asset managers maintain that there are a lot of investors who are gripped with fear.
Gilman Hill Asset Management Chief Executive Jenny Harrington told CNBC that investors who are either thinking of taking money off the sidelines and buying stocks or who are already in the market are afraid that equities have reached a top. The other half of investors seem appear to be following the advice of Warren Buffett – “be greedy when others are fearful.”