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Ladies and gentlemen, Tom Lee's prediction that the S&P 500 will cross 7,300 points have come to pass. And right now the S&P 500 has hit 7,365. Now, given that he is so tuned so accurate, should we now follow him because the next prediction is a very grim and frightening one. So, let's just watch on and I'll give you my advice.
So, this is Tom Lee. He's really one of the best stock market predictor in the world for US stock market. And he's right on many counts, but right now his next prediction is a pretty concerning one. So, the question is do we react on what he's predicting? Tom Lee's prediction of crossing 7,300 points has seriously come to pass.
And it looks like the market is going to go on even higher, maybe even 7,400 and 7,500. And this is where we are very clear that the AI boom is now strengthened and reinforced by Donald Trump's potential peace treaty that he's presented to Iran. And every step that's taking on right now by the conflicting parties looks like a step closer towards peace.
So, therefore, it looks like there could be some kind of a reinforcing of both a AI boom and a closure to the clock to the conflict. Now, so he's absolutely right this time and should we take concern of what he says going to happen next? So, Tom Lee has a powerful track record in building on both bull calls.
So, he has actually predicted quite a lot of things that's happened, especially bull runs. So, a post-COVID recovery, he said that there will be a powerful strong bull run where other people predicted that it will be a prolonged recession and a crash. Well, he's absolutely right on that. And that's the same for 2022 great inflation crash.
He also said that it's going to rebound strongly and so it did. And finally, he has predicted that there's a strong AI boom and he thinks that this conflict that caused oil crisis is going to come to pass soon and he's right on this one again. So, he has been right for I at least know 90% of of all the predictions he made.
And the question right now is will he continue to be right in the next one? What Tom Lee is predicting next is that there will be a powerful rally going on and when the new Federal Reserve Chairman comes on board, most likely it's going to be Kevin Walsh, the stock market will test the new Federal Reserve.
Now, historically, I said before, 14 out of 14 times historically, there is a there was continuous stock market test of the Federal Reserve Chairman and although each of the test the nature was different, but the market did correct itself downwards, sometimes very significantly, sometimes mildly, but on average is about 16%.
So, he predicts that that will come right after the Federal Reserve Chairman get appointed. He thinks that this testing of the Federal Reserve Chairman, there's a good chance that it could be linked to inflation. We all know that inflation is coming, that's without doubt. Then the test will be whether he how he reacts to this inflation and there could be potentially an equity sell-off and therefore cause the correction that we are all predicting.
Now, this time around the prediction happens at a time where there's extreme valuation and there is also high AI bubble kind of thing and potentially the Middle East situation does not resolve and get worse, then maybe you know, this time will cause a even bigger reaction. We don't know. It's a very difficult to predict now.
Unlike Tom Lee who is a very powerful oracle, uh we are we are just market watchers and seeing what we can see. So, the question really is if Tom Lee has been so accurate, then what he say, let's say it is really going to happen, then should we sell first then buy back? That's really the question, right?
So, ideally we sell somewhere around now or slightly higher and then when it crash, we buy it back. That's most most intuitive answer and strategy, right? No. What if Tom Lee is wrong? I won't do that because I think there's a lot of risk in doing that and I'm going to walk through with you some of these concern.
As I said, what if Tom Lee is wrong or at least Tom Lee is not strongly right? Meaning that the correction was only a little. Okay? And if that's the case, then if you sell and then you might just miss the buying back uh the buying back. Uh there's also human reaction, human psychology in play as well that he may be right but you may turn out wrong.
So, the problem with sell first, buy back later strategy is that your timing must be super accurate for two times. First, you must be able to time that you sell somewhere near the peak and then you buy on the way down, okay, or somewhere near the bottom. You need to be two times right. Uh that's very difficult, okay?
Now, it's probably arguable, you know, if you space out your buying, it's a lot easier, but really human psychology doesn't make it easy for most people. A lot of people it's going to be very fearful. So, when the market crash, a lot of them will chicken out and as a result miss a lot of all these market purchase.
So, I'll give you two quick scenario. Number one, the investor sells at 7,300 points and the market continue to rally to 7,400, 7,500, 7,600, 7,700, 7,800. And the investor suddenly realize that Tom Lee is wrong this time, right? Okay, maybe in between there could be a small correction of 5 7% and he did not react to it.
So, he missed out the entire rally. The The other one is Yes, the scenario is that the market actually crash to 20%, but the investor is waiting No, this time looks terrible. You crash to 40 50% and he waits out. Meanwhile, the market rebounds strongly and the investor totally miss out market. That could be 10 other possibility how the investor could miss out and that's something I would not put myself into as a risk.
So, what would I do? Well, I think I will play it safe. I will hold whatever positions I have, okay, and let it compound over a long period of time. And if I were to take up positions on new crashes, I would deploy dry powder. I think that would be the wiser thing for me and this way, you know, I get the best of both sides and minor in between corrections and volatility, I just ignore it.
I only take advantage of it when there's a big crash. So, that's what I'll do and I think this one works better for me because I hit market huge drawdown and I don't like to buy I don't like to buy in positions where the prices are high. So, I think that this will be my position. I'm not against people doing timing the market, try to sell first then buy, but I just think that that's very dangerous and that risk are very high.
Mr. Lu, how can Tom Lee be wrong? Well, I don't think Tom Lee is God, so he doesn't have the foresight of of future like God, but I think there is a reasonable chance to think that maybe the AI boom can override everything. He already overridden the entire Middle East war, which I think is very serious.
Maybe it's going to override whatever the testing of the Federal Reserve Chairman again. So, I think we have seen this kind of big renaissance of technology before. Internet revolution is one, dot-com is one, uh mobile, cloud, now AI. So, I think AI should not be underestimated. So, what's Tom Lee's bigger message?
Well, I think he actually didn't propose to everybody that, you know, you sell first then you buy. He just basically say that, you know, prepare for volatility ahead. There could be corrections that come, volatility that come. Just hang on. This shall pass soon and the market will have a strong rebound and he's predicting you'll end at 7,700 points.
So, let's see whether Tom Lee, whatever he says, will come to pass. He's right on 7,300 points and I'm very glad that that that that has come. And if what he says is going to uh going to come and did come about the market correction due to the testing of the Federal Reserve, that'll be great as well.
If it doesn't come, that'll be great as well. We need to be a position that that all kinds of market scenarios are all good for us. So, let's watch very closely whether all this will come to pass. Remember to subscribe and I'll see you in my live stream.
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