Tom Lee: S&P 500 Still Has 800-1000 Points Upside Potential
Tom Lee, chairman of BitMine, stated that the rise of U.S. stocks since April this year has been primarily driven by corporate earnings exceeding expectations.
The actual EPS of the S&P 500 in the first quarter reached $80, surpassing the expected $70, with a quarterly beat of $10, corresponding to an annualized profit increase of about $40, theoretically providing 800-1000 points of upside potential for the index.
In terms of market mechanisms, institutional funds are accelerating their pursuit of earnings-driven assets; event-driven funds are shifting from defensive sectors to high-growth stocks; companies with strong earnings benefit, while interest rate-sensitive sectors and those reliant on dovish policies face pressure.
Source: Public Information
ABAB AI Insight
Tom Lee has previously been bullish on U.S. stocks and maintains a "three-phase market" framework: in the short term, the S&P 500 is expected to rise to around 7700 points, followed by a period of volatility before October due to the new Federal Reserve Chair Waller's appointment, energy price shocks, and liquidity pressures from large IPOs like SpaceX, OpenAI, and Anthropic. After the midterm elections, a rebound is anticipated, with 2027 potentially being "one of the best years for returns in a lifetime."
In terms of capital flow, earnings exceeding expectations provide solid support for the market, but rising oil prices have shifted the bond market's expectations from rate cuts to rate hikes, putting pressure on many sectors, with funds likely concentrating further on high-quality earnings companies that can withstand higher interest rates.
Similar to the earnings-driven rallies from 2023 to 2025, and the periodic liquidity draining effects of large tech IPOs; currently, U.S. stocks are in a transitional phase where strong earnings coexist with macroeconomic uncertainty.
Essentially, this represents capital concentration, shifting market funds from valuation expansion to fundamental support through actual earnings exceeding expectations, while also concentrating on high-profitability assets under interest rate pressure. The mechanism is that EPS significantly exceeding expectations provides mathematical upside potential for the index, but energy shocks and liquidity events will be the main short-term disruptive factors.
ABAB News · Cognitive Law
Earnings exceeding expectations is always the strongest reason for stock market rallies.
In the short term, focus on performance; in the medium term, focus on liquidity; in the long term, focus on who can survive the rate hike cycle.
When oil prices shift bonds from rate cuts to rate hikes, only companies that can truly make money deserve high valuations.