Behind the video
The UNTHINKABLE is About to Happen to Stocks
Overall Thesis
The stock market's future direction depends on identifying where we are in the 100-year market cycle (hope-euphoria-depression), and current valuation metrics suggest we are at average levels rather than extreme euphoria.
Narratives
SPYS&P 500Tom argues that despite the S&P 500 being near all-time highs, objective data (forward P/E of 20, in line with the 10-year average; current bull run of 100% over 4 years vs. historical average of 265% over 5.5 years; broad earnings growth across 10 of 11 sectors) shows the market is not in a euphoric, bubble stage. He concludes the index is fairly priced and the rally has room to continue, especially if the Fed begins cutting rates.
Key Arguments
- Forward P/E of 20 matches the 10-year average, and current P/E of 25 is actually lower than last year's 28
- 87% of S&P 500 companies beat earnings, 11 points above the 10-year average, with earnings growth of 52% vs. 23% estimated
- The current bull run (100% over 4 years) is below the historical average bull run of 265% over 5.5 years
- 10 of 11 S&P 500 sectors grew earnings and the equal-weight S&P 500 is up 16% YTD, showing broad-based strength
- IPO activity (~150 projected for 2026) is far below the 460 IPOs seen in the 1999 dot-com euphoria
Risks acknowledged
- Michael Burry has compared the current market to the dot-com era
- Unemployment at 4% and CPI at 3.5% are 'not great' though still considered sustainable
Predictions (1)
QQQNasdaq / QQQ (AI-driven tech rally)Tom compares the current AI-driven Nasdaq rally (150% since ChatGPT's 2022 debut) to the dot-com internet cycle (600% Nasdaq gain in the four years following Netscape's 1994 launch), arguing the AI cycle is nowhere near the euphoria level of the dot-com boom. He suggests this implies more room for the Nasdaq/AI rally to run before hitting a euphoric peak.
Key Arguments
- Nasdaq is up almost 25% over the past 12 months
- Since ChatGPT launched in 2022, Nasdaq is up about 150% over 4 years, versus 600% in the 4 years following the 1994 internet browser launch
- Nvidia, a Mag 7 leader, saw revenue growth of 106% with a PEG ratio of 0.4, suggesting it's cheaper now than two years ago despite the rally
Risks acknowledged
- Some argue AI could be a bigger technological shift than the internet, which Tom says would make the comparison even more favorable, but he calls this just an opinion
BEBloom EnergyTom briefly cites Bloom Energy's 200% rise as an example of stocks currently flying up in the market, without providing further analysis or a forward-looking thesis on the stock itself.
Key Arguments
- Bloom Energy is up 200%, cited as an example of extreme recent stock performance
MSTRMicroStrategyTom briefly cites MicroStrategy's 200% rise as another example of stocks currently flying up in the market, without providing further analysis or a forward-looking thesis on the stock itself.
Key Arguments
- MicroStrategy is up 200%, cited as an example of extreme recent stock performance
Hedges & Caveats
- Nothing in this video constitutes tax, legal, financial and/or investment advice
- The presenter acknowledges conflicting expert opinions (Michael Berry vs. Tom Lee) without resolving them
- The analysis relies on interpreting market cycle positioning, which the presenter admits is difficult in real-time
- Past performance of market cycles does not guarantee future results