Almost no one but Tom Lee.
As JP Morgan’s chief US equity strategist, Lee forecast in December 2013 that the S&P 500 would top out at 2,075 in 2014, surging 17% from the time he made that call.
“The bull market, which began in March 2009, is acting like a ‘classic’ secular bull market,” Lee wrote in a Dec. 13, 2013 note. “[T]he 6th year of a bull market has historically been very strong, which would suggest that the market will continue to build upon the strong gains seen in 2013 as it enters its 6th year.”
At the time, Lee was the most bullish of the 14 strategists followed by Business Insider. The next most-bullish strategist predicted the S&P would hit 2,014.
Today, Lee is the head of Fundstrat Global Advisors, where he continues to be more bullish than most Wall Street strategists.
So, what did Lee’s peers get wrong about 2014?
“If you looked at consensus forecasts for 2014, I think a few incorrect assumptions (in retrospect) were reflected in the consensus forecast: (i) a strengthening economy (recall, Economists said growth would accelerate in 2014) was not good for stocks as it precipitated Fed action and (ii) the Street generally saw markets taking a breather after the 30% gains in 2013,” Lee wrote in an email to Business Insider.
That first point surprised a lot of pros, including the interest rate forecasters who thought that an improving economy and a more conservative Federal Reserve would lead to rising interest rates. For many stock market pros, higher rates meant lower stocks.
That didn’t happen. Even Lee admitted “lower interest rates certainly surprised us.”
Going into 2015, Lee sees the S&P getting as high as 2,325, which is 11% higher than 2014’s closing price.
Again, that’s far more bullish than most of his peers on Wall Street.
“Be contrarian,” Lee says. In a Dec. 18 note to clients, he wrote, “[T]he current bull market is not going to end simply because ‘stocks have gone up too much.'”
We asked Lee what his peers were getting wrong about 2015.
“I think strategists are underestimating the recovery in the consumer balance sheets and the level of pent-up demand,” Lee told Business Insider. “Look at sector recommendations and few are recommending Consumer Cyclicals.
“Consensus seems to see deflation pressures from lower oil. But we think with the improvement in jobs and consumer confidence, investors need to be positioning themselves for reflationary trades. That is, Technology, Financials, Healthcare and Consumer Cyclicals.”
Still, Lee is no unconditional bull. He sees plenty of reasons why the stock market’s bull run could get derailed.
“There are quite a few risks in 2015 with most acting as deflationary pressures: (i) the collapse in oil creates a downward spiral of credit defaults; (ii) China’s real estate price weakness broadens into an full blown housing crisis; (iii) Europe’s economic weakness deepens and the ECB and fiscal policy react too slowly and (iv) US dollar is so strong that it weakens US multinationals sufficiently,” Lee wrote.
For now, Lee deserves some credit for his accurate 2014 call.
“Our clients pay us for investment guidance, non-consensus analysis and actionable ideas throughout the year so the target is not our primary job,” Lee said. “However, the target serves two important purposes — first, it is a gauge of our conviction of our views (i.e., if someone is bullish but they only see 2% annualized upside, are they talking out of “both sides of their mouth”?) and second, the target is a basis then to say, ‘OK. How do we profit from this?'”