Tom Lee, currently the managing partner and head of research at Fundstrat Global Advisors, has been a Wall Street analyst for more than 25 years. He previously served as chief equity strategist at JPMorgan Chase.
Lee manages the Fundstrat Granny Shots ETF, a thematic fund built around major trends such as artificial intelligence, cryptocurrency, cybersecurity, and electrification. The Granny Shots ETF has outperformed the S&P 500 (^GSPC +0.13%) by 13 percentage points since its inception last year, which makes Lee a good source of inspiration.
Lee thinks the S&P 500 will reach 15,000 by 2030 as automation and millennials reshape the economy. That implies 123% upside from its current level of 6,728, which is equivalent to an annualized return of 17% over the next five years. Investors can lean into that possibility by purchasing shares of the Vanguard S&P 500 ETF (VOO +0.10%).
Here are the important details.
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Why Tom Lee thinks the S&P 500 will hit 15,000 by the end of the decade
Tom Lee's prediction about the S&P 500 hitting 15,000 by 2030 is built around two themes: Businesses will adapt to the global labor shortage by adopting artificial intelligence (AI), and millennials will reshape the economy as they inherit substantial wealth from previous generations.
- Automation: Lee believes the global labor shortage, which began in 2015 and will not be resolved until 2035, will reach 80 million workers by 2030. To overcome that obstacle, he says businesses will adopt artificial intelligence tools to automate workflows. In turn, technology stocks could eventually represent about 50% of the S&P 500 by weight.
"Between 1948 and 1967, there was a global labor shortage and technology stocks went parabolic. And between 1991 and 1999, there was a global labor shortage and technology stocks went parabolic, so this is what's happening today," according to Lee.
- Millennials: The millennial generation is expected to inherit more than $45 trillion over the coming decades in what The New York Times has called "the greatest wealth transfer in history." Some estimates are even higher, but the key point is that millennials will control more disposable income by 2029 than any other generation. That means their preferences for newer technologies will have an outsized impact on the economy.
"Since 2018, we've talked about how millennials, which is the largest generation, are reshaping the economy...mainly through fintech and changes in preference. But of course, now coming is a big generational wealth transfer," Lee told Bloomberg last year.
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Key Data Points
The Vanguard S&P 500 ETF tracks many of the most influential stocks in the world
The Vanguard S&P 500 ETF measures the performance of the S&P 500, which comprises about 80% of U.S. equities and 40% of global equities by market value. In other words, the index fund offers exposure to many of the most influential stocks in the world.
The top 10 positions are listed by weight below:
- Nvidia: 7.9%
- Microsoft: 6.7%
- Apple: 6.5%
- Alphabet: 4.4%
- Amazon: 3.7%
- Meta Platforms: 2.7%
- Broadcom: 2.7%
- Tesla: 2.1%
- Berkshire Hathaway: 1.6%
- JPMorgan Chase: 1.4%
The S&P 500 returned 712% over the last two decades, compounding at 11% annually. That is much lower than the annual return of 17% implied by Lee's prediction about the S&P 500 hitting 15,000 by 2030. I mention that not to say that he is definitely wrong, but rather to impress upon readers that his prediction is aggressive.
Nevertheless, I think most investors (even those who own individual stocks) should have some exposure to the S&P 500. And buying shares of the Vanguard S&P 500 ETF is a good way to make that happen. It has a very low expense ratio of 0.03%, meaning investors will pay just $3 per year on every $10,000 invested in the fund.
