Calling a ‘New Bull Market,’ Fundstrat's Lee Lifts S&P 500 Target

(Bloomberg) -- Add Tom Lee to the growing list of Wall Street strategists getting out in front of an equity rally that has quickly outrun their 2019 year-end targets.

The co-founder of Fundstrat Global Advisors LLC boosted his prediction for the S&P 500 to 3,125 from 2,925, citing better-than-expected first-quarter earnings and the potential for investors to pay up for shares given lower bond yields. The new target represents about a 7 percent gain from current levels.

Calling a ‘New Bull Market,’ Fundstrat's Lee Lifts S&P 500 Target

Investors shaken by the equity sell-off last year have been reluctant to embrace the rally, a condition that would embolden further gains should economic data continue to improve, according to Lee. He draws a parallel between now and 2009, saying both years started in the wake of a collapsed stock market. The current bull run started 10 years ago at the depths of the global financial crisis. Last year, the S&P 500 fell to the brink of a bear market.

“The equity gains have been largely met with skepticism,” Lee wrote in a note to clients. “We believe investors will ultimately see 2019 as start of a ‘new bull market’ given the breadth of market declines seen in 2018.”

The S&P 500 has surged 17 percent this year, notching record highs, as the Federal Reserve turned more dovish and companies are beating estimates at an almost unprecedented pace. The benchmark gauge last month exceeded the average year-end target from strategists tracked by Bloomberg, marking the third time over the last two decades that such a disconnect happened this early.

The relentless gains have forced some bears to capitulate. Earlier this week, Wells Fargo’s head of equity strategy Christopher Harvey hiked his forecast to 3,088 from 2,665, going from the second most pessimistic to the No. 2 bull. That title, however, didn’t last long since Lee just came up with a higher number.

Deutsche Bank’s Binky Chadha stays as the biggest bull, with a target at 3,250.

©2019 Bloomberg L.P.