Tom Lee: Still a good risk-reward balance in equities, even in the stocks leading the rally
Speakers
Tom Lee
— Managing Partner & Head of Research, Fundstrat
Summary
Tom Lee discusses equity market risk-reward, bullish on semiconductors due to reasonable valuations and AI demand, warns of potential drawdown later due to new Fed chair and petroleum shortage. He highlights AI's positive GDP impact and expects oil prices to rise from Strait closure.
- Tom Lee sees good risk-reward in equities despite the rally.
- He highlights semiconductors as not expensive with forward PE of 22x.
- He expects a shortage of petroleum products from Strait closure to drive oil prices higher.
- He warns of a potential 15-20% drawdown later this year from Fed transition and energy shock.
- He notes AI adding 2% to US GDP annually for five years.
- He observes retail investors chasing the move in memory and semis.
- He cites AMD as an example of strong AI-driven earnings.
- He remains bullish near-term but cautious on later headwinds.
Trade Ideas
Semis not expensive, good risk-reward.
Semiconductors still have good risk-reward because the forward P/E of the semi index is only 22x, well below historical peaks of 35x, while earnings are strong and the AI-driven scarcity of compute supports demand.
