The connection between valuations and rates reveals an intriguing relationship where companies can thrive even as treasury yields double. Cash-rich mega corporations benefit from higher rates as it directly adds to their earnings due to lower debt. Furthermore, higher rates create a moat that enhances competitiveness for established players but poses a challenge for new entrants. This dynamic suggests that higher rates act as a centralizing force for capital-rich entities while penalizing those with limited capital, affecting capital markets activity.
The stock market has had a torrid run in 2024 despite the fact that interest rate cuts haven't materialized in the way people had expected at the start of the year. In fact, outside of a few blips here and there (like spring 2020), US stocks have been phenomenal performers for years. Tom Lee, the founder of Fundstrat and FS Insight has been bullish for a long time, having caught the correct side of this lengthy trend. On this episode, we speak to the former JPMorgan strategist about how he thinks about the market, what he sees happening right now in macro and demographic trends, and why he thinks it’s plausible that the market could roughly triple in the next six years.
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