Tom Lee probably appears on the compound on the third or display.
Tom Lee says it’s still early.
I think, after it went so much, it is quite incredible that we are still early. Interestingly, Mike Wilson from Morgan Stanley (who does not remember the most to be Bearish for the wrong reasons) also thinks this is a start. So both share the display.
I think I will show you if you want to view it, but I just want to bring two points to the fore that attracts my attention (but may not be interested). For my crypto -invested friends, you might want to see what he says around mine, and also the financial sector.
An alternative framing to contextualize the current appreciation of the market
Tom Lee started his career as a stock analyst and if we look at an equal version of the S&P 500 (to remove the arguments that lead a small number of shares) as a single stock, this stock has practically six recent events that should have killed the stock:
- COVID-19
- BullwHip Chain Effect (The Supply Chain problem due to the COVID)
- The fastest inflation in history
- The fastest fed walk in history
- The Trump rate shock
- American bombing at the nuclear facilities of Iran
Each of these should have interrupted the bullmarkt or have increased the risk. If you have a share that acts with 16 times PE, that this effect underwent, survived, not only that, but the profit considerably enlarged, a wise price gains for this share should be higher.
But such shares is not because the price recording (see the graph 17.6x to 16.9x) is actually lower.
The meaning of a weak in collaboration with production -survey -results and their relationship with this broad idea
Tom Lee believes that these are the most important catalysts to break out:
- The Fed is put on hold of all year round and if they are cut, it means that a Dovish cycle will resume.
- The American ISM production PMI is already 30 months lower than 50, so that is a headwind if it waves over 50.
- Agentic AI shows useful applications, which means that companies use AI to grow their business.
I find his remark about why the in collaboration with is interesting.
Tom mentions that ISM survey is even more correlated with S&P income than the Services Index. This is the case we think that the US is more based on services based on less production and this is less important.
He sees it as a sign of business trust. The CEOs of these companies get their opinion about the economy of the Fed and Wallstreet because most do not have an internal economist. If the economist is careful, then companies are careful, it explains that the oppression of the in collaboration with. This means that you do not finance capital expenditure that goes beyond the question.
Since expansive expansion has not taken a plan that is an expansion.
Tom loves the in collaboration with the ISM survey because it is a survey where there is no political bias. The hosts pushed back who is not a survey if this inaccurate or bias is in their own way?
Tom sees this more as if the measurements are low, and so low by as long (this is the longest piece that this has been so low since the 1950s), then the people who fill the survey (the members of the Institute of Supply Manufacturing, including those purchasing managers at Intel, Apple, Nvidia) are in a negative and careful manner. And what interests us is that the general mood is careful with the expenditure of the growth capital. The reasons are probably inflation and rates. So this is not an environment (apart from those who did well, who spend so much on AI Capex) where we are bullish and have spent a lot on the expenditures of the growth capital.
The caution tells us where we lean closer from a real economy perspective. Tom says that we have never had a market cycluspiek when ISM is less than 50.
This graph will show us where the ISM research is and how it relates to the recent 20 -year market. The current behavior is unusual (we can say broken) because the ISM has been down for so long, but the S&P 500 are doing well despite that.
What would this in collaboration with is a combination of:
- Dovish Fed
- More predictability in policy
- We need the surplus spread on interest products to fall.
They are not all given.
I would expand more to number 3.
If we borrow for a mortgage, we usually borrow at 1.6% above the American 10-year rate. If the 10-year-old is currently 4.2%, the mortgage must be at 5.8%. But currently the rate is 7%, which means that there is an excess distribution on mortgage.
Tom thinks that when #1 and #2 takes place, which can fall surplus spread.
There may be that surplus distribution because banks are concerned about the speed of advance payments. This is the risk that the mortgage can be reimbursed earlier and, just like the effects covered by mortgage, the banks lose money or change the current value when customers repay the loans earlier. Or it can be the uncertainty about the value of the collateral.
Tom thinks that a simple way to visualize the impact is that if there is 20 trillion in mortgage and half of them is higher than that 7% (this is the part that I do not agree with Tom. I think the majority of the American mortgages are much lower on 30-year-old mortgage), and that would be about 10 trillion. If there are 1.6% of these spread savings on 10 trillion, that collective is $ 160 billion in people’s pockets.
Side but rather remarkable comments:
- Many people like to believe that this bullmarkt is led by those 6/7 mega companies, but he found that misleading. This is because his grandma shots ETF (Ticker: Grny), not only consists of these companies, but it is also important that the ETF is the same and the ETF performs better than the S&P 500 years to date. Granny Shorts is in his opinion quality growth, and that means that you have the chance to do well and do not have to trust those mega companies.
- The host pointed out that there were winners and losers of this AI situation, because many of the software companies have reached 52 weeks of lows. Tom noted that in many of these situations the evergreen observation is that the winners are easy to identify, but the potential winning opportunities of the losers are less visible, but it does offer an opportunity for those people to choose if they thought the market is expensive.
- One of the most interesting thing about Tom’s thoughts is that the American financial system is about to be recovered. It can be comparable to the concept of oil when suddenly has more exploration and production. If the sector is re -imposed in a certain way, the American financial sector can be as great as the technical sector. The PE of JPMorgan can become a growth collic if they can really remove the friction (many of the intermediaries) in many of the traditional financial architecture. Tom reminds us that the banks may be too late, but they are already large and have a lot of the assets. The first is what I mentioned about the regional banks, in AI, less compliance, the staff may drop a lot. JPMorgan, Goldman and Morgan Stanley have the assets, the relationships of people who will follow them in new things, and if they earn more money with stable coins, the metric to judge them may no longer be of price-tangible book.
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