Value Investor Daily #75

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Tom Lee’s 2025 Market Outlook

Tom Lee, Head of Research at Fundstrat Global Advisors, outlined his predictions for the markets in 2025 market:

• Market Resilience in 2024: The market has shown surprising strength, avoiding numerous potential pitfalls and downturns.

• Cash on the Sidelines: Approximately $7 trillion remains uninvested, with potential for end-of-year strength.

• Mega Cap Stocks Leading: Investors still favor mega-cap stocks, especially as interest rates decline.

• Interest Rate Sensitivity: Mega-cap stocks are particularly responsive to falling interest rates.

• December Rate Cut Anticipation: The likelihood of a December interest rate cut this week has increased to 93%, which is favorable for mega-cap tech stocks.

• CPI Data Interpretation: Recent CPI figures of 2.7% inflation suggest a continued cooling trend. Investors can “imagine 2%” inflation now.

• Federal Reserve’s Position: The Fed's cutting cycle is firmly intact with inflation cooling. This will bring rates closer to the eventual target neutral range of 2.5% to 3%.

• Economic Strength: The economy remains robust, with a stable labor market, allowing the Fed to maintain current rates and slow-walk future cuts without adverse effects.

• “Trump Put”: The administration will measure its success by stock market performance, encouraging investors to go risk-on in 2025 and beyond.

• S&P 500 Projections: Lee predicted the S&P 500 could reach 7,000 by mid-year, with a year-end target of 6,600, considering potential second-half challenges. Since 1880, when markets were up 20%+ two years in a row, they have been weak in the second half of the following year.

• Second-Half Market Concerns: Possible issues, such as Middle East tensions, tariffs, and DOGE budget cuts, could slow the overall economy.

What do you think, is 7,000 in the cards for the S&P in 2025?

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