Tom Lee on Navigating Growth and Innovation

Monday Webinar Overview

On Monday, we sat down with Tom Lee, Managing Partner and Head of Research at Fundstrat Global Advisors. Tom founded Fundstrat in 2014 and just celebrated the firm’s 11th year of independent research. His outlook remains constructive as he emphasized that resilient corporate earnings, well-behaved credit markets, and two durable growth drivers, AI and blockchain, will underpin the next five to ten years of U.S. growth. It was a great conversation, and much of what was discussed we agreed with and have written about in our most recent commentaries on 8/25, 8/27, 9/8, 9/10, 9/15, and 9/22.

Positive Signs in the Labor Market and the Macro Environment

Positive Signs in the Labor Market and the Macro Environment
The labor market has shown signs of moderation, but Tom continues to stress that conditions remain resilient. He pointed to company results and credit markets, noting that high-yield spreads have not confirmed any of the recessionary calls that have surfaced. His focus is on weekly initial jobless claims, smoothed with a four-week moving average, which he views as a more reliable measure than the monthly reports that often suffer from noisy revisions. Tom reminded us that spikes in claims sometimes reflect fraudulent or automated filings, which require careful interpretation. Jobless claims have risen modestly, but are far from levels associated with recessions. He expects slowing, not collapsing, labor market conditions, which supports staying constructive on cyclical areas of the market.

Tom’s overarching message is not to confuse fear with fundamentals. Despite persistent recession forecasts, neither earnings nor credit markets have validated those concerns. With a resilient consumer, tight credit spreads, massive AI and cloud capex, and the potential for improved corporate confidence as the Fed eases policy, Tom remains constructive. He sees the best opportunities in structural winners such as AI infrastructure, cybersecurity, housing, autos, data centers, and financials that can harness AI to become more productive, while staying more selective in energy and commodities.

Bullish Federal Reserve Policy

Tom sees the Federal Reserve moving into an easing cycle and believes that the Fed’s communication will matter as much as the actual cuts themselves. A clearer message on easing would encourage capital expenditures and M&A, fueling demand for longer-duration commitments like housing and industrial investment. He noted that tariff uncertainty has kept the Fed on hold. But, once this overhang is resolved, he expects the Fed to act more decisively. Importantly, Tom argues that rate cuts can come alongside a reasonably strong economy, which would be highly constructive for equities if inflation continues to behave.

Tariffs have been a source of market volatility, but Tom takes a pragmatic view. He explained that markets dislike uncertainty, and the fear around tariffs earlier this year has already been incrementally priced in. While tariffs may disrupt in the short term, he expects them to serve primarily as leverage in trade negotiations rather than becoming permanent structural barriers. As these issues normalize, investors will be able to refocus on pro-growth drivers such as deregulation, tax policy, and the ongoing AI and infrastructure capex cycle.

Perspective on AI Bubble Fears

Tom addressed common fears about the AI boom by telling the story of frozen fruit. He explained that when frozen fruit first hit grocery shelves, some analysts feared it would devastate the economy as consumer food spending would drop, and farmers would lose jobs, driving unemployment. In reality, frozen fruit created new demand, expanded consumption, and complemented the existing market. He sees AI in the same way. While some jobs and processes may be automated, the overall productivity gains will create new markets, efficiencies, and economic expansion, rather than simply destroying existing industries.

Tom is confident that AI is a quantum productivity wave and that the massive corporate capex behind AI and data centers is justified. He sees hyperscaler spending as a structural demand driver for semiconductors, servers, power, and related industrial supply chains. While some efficiencies may reduce costs at the margin, the need for best-in-class compute, including Nvidia accelerators, will remain powerful.

AI’s Biggest Benefactors

Cybersecurity, in Tom’s view, may be an even bigger long-term opportunity than AI itself. He stressed that security underpins everything digital and becomes more critical as AI accelerates new risks. With more business processes and consumer experiences moving into digital and AI-driven frameworks, the need for robust security solutions will only expand. This makes cybersecurity one of his highest-conviction growth themes.

Tom additionally stated that financials could be one of the biggest beneficiaries of AI. He believes banks will be able to harness AI to create far more efficient business models, using advanced tools for credit modeling, trading, and operations. By doing so, they can reduce headcount, expand margins, and ultimately behave more like technology companies in terms of scalability. This sector has been overlooked, and expectations remain low, which sets the stage for significant upside if AI adoption plays out as Tom anticipates. He sees financials as not just participants but potential leaders in the AI-driven productivity wave.

Crypto Currency

Tom has long been one of the most prominent Wall Street voices in support of Bitcoin, and his conviction remains high. He sees Bitcoin as a structural asset class that will play an increasingly important role in portfolios over the coming decade. In his view, Bitcoin combines the scarcity value of gold with the network-driven scalability of technology, making it uniquely positioned to capture both store-of-value demand and innovation-driven upside. He believes the recent institutionalization of Bitcoin through ETFs, custody solutions, and broader regulatory clarity has de-risked ownership and opened the door to significant inflows from pensions, sovereign wealth funds, and large asset managers.

Tom also pointed out that Bitcoin has consistently shrugged off fears of regulation or competition from central bank digital currencies, reinforcing its resilience as a decentralized asset. He views Bitcoin as a hedge not just against inflation, but also against policy uncertainty and weakening confidence in fiat systems globally. While volatility will remain a feature, Tom argues that investors should see it as a source of opportunity, not risk, given the long-term trajectory of adoption. His overarching view is that Bitcoin is still in the early stages of mainstream acceptance,and that the next five years could see it emerge as a core allocation in institutional portfolios, much like equities and bonds today.

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