Tom Lee was in CNBC and it literally left everybody speechless. He came in and said, look, 2024, inflation is going to fall severely and that will mandate the FED to drop rates which will send equities up. That's the general kind of Direction And he was right all along this year and he deserves credit for that. He was bullish when everybody else, including myself, were bearish about 2023.

So everybody was negative this time last year. but you were not why. Uh, well, it's really two things. One, we we thought inflation would fall Like a Rock Whereas many were bracing for a decade of sticky fed fighting inflation, markets were down 20% the year before.

So in 2024, will inflation keep falling like a rock and will we still have a soft Landing Uh yeah. I Think your food chart is spot on? I Think consumers will realize that the rate of price increases is slowing uh, We saw in the Yish surveys that will give Fed a lot of leeway to cut rates next year to keep real rates constant uh, housing and Autos is really 70% of inflation so both are going to normalize and that means 2% is going to be very visible next year. And just to summarize what he said in about a minute, look, he said a few important things: You don't have to watch the entire clip, but you can I'm going to put the link below in the description, but when it comes down to Brass tax, this is what Tom Lee is predicted for 2024. He says look, S&P 500 is going to do 5200 this year in 2024, which means from 4700 to 5200, it's going to be a great year.

He also says that the market is not as expensive as certain people feel because there's a recency bias. The market isn't as expensive as the perception now. He also says small caps are insanely undervalued and that he expects small caps to do 50% in 2024. He also says that new highs for the entire Market are days away.

which means it's going to be a very, very happy new Year for a lot of investors. And I think it's a huge relief for Equity Market Market when that happens. Tom uh, Happy New Year uh. First off, congratulations on your calls this year.

you've been directionally correct. That's hard to do so. Kudos to you. You're top dog now.

5200 You have the high estimate for the S&P 500 for 2024. Yeah, it's it. It's really sort of three parts. The first part is, you know what is probable based on sort of Market history.

like where we are in the business cycle. What did the markets do the year before? You know where's positioning? That's more of a gives you a pretty wide highway to think about what markets could do. So next year, double digits is more than 50% probability. Uh, even though we were up 25% this year.

But then we look at e the earnings and we think can you grow 10% which I think is easy base case cuz there's pent up demand for capex and we know the Pmis are going to turn and the guidance actually has been pretty decent. And then it's what multiple do you apply? This is where I think people get make mistakes when the tenure is at between 3 and 4% 65% of the time the PE is over 18 times. 50% of the time it's over 20. That's since 1900.

Well uh, the S&P equal weight is 15 * Ford or X Fang it's 15 * Ford Well if that 15 goes to 18 or 15 goes to 20, the stock market's going to be up 30% So we figure, well, you hold the multiple earnings grow 10, you get 5200. but that means there's upside to that number. Talk about your small Cap call because that's a big one. 50% Next year we've we've certainly if that happens, has have had a preview in the last few weeks about the comeback and small cap.

Why do you think there's so much room left to run here? Uh, well. I Think people need to put a long-term lens on small caps. Um, on a price tobook basis for Russell which is the highest correlation to Ford returns relative to S&P It's at the 1999 lows you. you've never seen them cheaper.

We turned bullish on small caps around November and people thought maybe it's just a base it up five? it's up 25% % I I Think small caps could easily add 50 percentage points next year, but can small caps rally when other when large caps are not rallying when Tech is not rallying. Uh, there's a lot of precedent for that. like 99 to 2003, you had a pretty vicious bare Market Those were some of the best absolute return years for small caps, But he also had an important warning which I don't want you to ignore because this warning is also a huge opportunity. He said, look, it's not going to be linear.

it's not going to go spiking up. it's going to have a bad period in between. And he thinks that in February late February early March is when the market is going to take a pullback. It's going to be happy days.

From this point until February and then in late February beginning of March the market is going to correct as it always does after new Highs and then a lot of people will be spooked out, out of the market will be spooked out out of growth. And obviously, if that happens, you're going to have a huge opportunity to buy a lot of these equities for their cheap because the market will overreact like it always does, right? And I know you expect a a little turbulence in February right? March Yeah, I Yes. I'd say if if history was sort of your guide. January February S&P gets to you know 5,000 I Mean you know I Think new highs is just a matter of days.

Um, but then the March late Feb March April is when you get the 5 10% draw down and then up from there. Yeah, and then up from but that's the big growth scare and so everyone will panic and that's probably the time to be buying again. Now look I don't know if Tom Lee has a crystal ball or not. This year he was absolutely spot on.

I Thought this is going to be a bad year. He thought it's going to be a great year. He beat a lot of the experts this year, so I give him a lot of credit for that. Now his thesis makes a lot of sense to me.

Look, inflation is coming down. If you break it down, inflation is currently being held up by two things which is shelter and oil. Oil and shelter tend to drop into winter. It's not a good time for both of these elements.

Because of cyclicality, shelter goes goes up in the summer months when people move, and oil also goes up in the summer months when people travel. In the winter is usually when you see a decline. So if we are headed to three four months of decline in these two categories, obviously inflation is going to come down. It's going to come down a lot closer to that 2% range which will going to entice the FED to actually reduce rates which is going to spread a lot of capital and going to make a lot of companies get more funding, more finance and that will obviously drive a lot of activity, drive a lot of spending and dve the entire market and then as a derivative, the stock market will go up as well.

and obviously since nobody really knows except Doc Brown and Martin MC what happens in the future? The best strategy is probably to listen to Tom Le put some cash aside to late February early March and then if that actually happens, if his prediction actually pans out, you can buy a little bit. but the main strategy here is to stay the course long-term DCA Ignore the noise, but if you see Pockets like this of opportunities, you can increase a little bit. Definitely, but don't go timing the market I Don't think this is what Tom Lee is advocating for. He's basically saying look, you have to understand Macro: if you have a lot of cash, you can deploy a little bit of it in portunities like this.

but this isn't what he's talking about neither am I I'm not talking about going all in in February and March and betting your house on timing the market. Don't be stupid, make sure 2024 is a year when you long-term dollar cost average into great companies if you see market spookiness like this. Definitely a good opportunity to add and improve, but stay the course, keep your eye on the ball, Have a great 2024 go do your thing! I'm going to have a great night today with Grandpa See you after New Year's.