4 reasons why stocks can still climb 'a lot' more, according to renowned strategist Tom Lee

• Tom Lee — managing partner and head of research at Fundstrat Global Advisors — broke down the four factors informing his belief that stocks can "still go up a lot."
• Among his reasons are the Fed and fiscal policy, a global labor shortage, and the growing population of millennials in the US.
• "2020 is probably the start of a new bull market that might last 20 years," Lee said.
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Stocks have demonstrated "extreme resilience" in 2020, according to renowned strategist Tom Lee, who thinks they can "still go up a lot."

In a recent note to clients, the managing partner and head of research of Fundstrat Global Advisors broke down four factors factors driving this belief:

(1) Federal support and fiscal policy

Lee said the Federal Reserve and fiscal policy are providing "massive support" to markets, and thinks Wednesday's decision to keep rates lower for longer underscores this. He reiterated the age-old advice "don't fight the Fed," but added that economic policy can't be the sole factor driving stocks higher.

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(2) Stocks are more valuable within the current capital structure

US corporates survived "the most extreme stress test of any of our lifetimes," during the global pandemic, and largely prospered, according to Lee. He added that within the corporate capital structure, stocks have proved to be "more valuable in a time of stress than previously exhibited."

(3) A global labor shortage

Lee said that the world's current "structural labor shortage" will be a key driver behind US stocks' momentum. The strategist highlighted a chart which shows that since 1930, periods of US labor shortages have consistently led to "parabolic gains" in technology stocks.

The US has been structurally short labor since 2015, and Lee said the world is becoming more reliant on technology to offset this labor supply contraction. He said technology is likely to become 50% of the S&P 500.

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(4) Millennials are driving the US economy — but haven't "peaked" just yet

Millennials are the single largest ever generation in the US, but aren't expected to peak in total size until 2038, said Lee. Since 1900, every generational "peak" coincided with a "major market top" of the Dow Jones Industrial Average.

"Hence, 2020 is probably the start of a new bull market that might last 20 years," Lee concluded.

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