• A decadeslong labor scarcity is ready to shake up the sector allocation of the inventory market, in keeping with Fundstrat.
• Fundstrat’s Tom Lee believes that the know-how sector will someday make up 50% of the S&P 500.
• Technologies like automation and synthetic intelligence ought to turn out to be extra necessary amid labor shortages.

Our Chart of the Day is from Fundstrat, which means that the know-how sector will someday make up greater than 50% of the S&P 500 attributable to a decadeslong structural labor shortage.

The chart overlays the efficiency of know-how shares relative to the S&P 500 with knowledge that exhibits durations of labor shortages and surpluses. During durations of prolonged labor shortages, like throughout the Nineteen Fifties, Nineteen Sixties, and Nineteen Nineties, know-how shares considerably outperformed the S&P 500.

Fundstrat cofounder and head of analysis Tom Lee expects know-how shares to go “parabolic” once more within the coming years as a brand new labor scarcity will get underway and as applied sciences like automation and synthetic intelligence help fill the gap of fewer and fewer workers. 

“Solving the global labor shortage requires technology that can act autonomously on the physical world,” Fundstrat advised purchasers in a notice final 12 months.

The uptake of that know-how ought to result in elevated enterprise for tech firms, which finally results in elevated earnings and better inventory costs. 

“Technology demand, in our view, will accelerate as companies seek to offset labor shortage,” Fundstrat mentioned. 

The present labor scarcity, measured by the distinction between whole inhabitants development and working-age inhabitants development, started in 2015 and is anticipated to final till 2047, in keeping with Fundstrat. 

“The outperformance of technology during periods of labor shortage is substantial — and we believe the forecasted 2015 to 2047 [labor shortage] to benefit technology stocks,” Fundstrat mentioned in a current notice. 

The info know-how sector already makes up about 30% of the S&P 500. That allocation jumps to 43% once you embrace broader tech firms like Meta Platforms, Alphabet, Amazon, and Tesla, that are discovered within the communication providers or shopper discretionary sectors. 

While know-how shares had a robust 12 months in 2023, with the Nasdaq up greater than 50%, Fundstrat expects the good points to proceed in 2024. 

“We like technology/FAANG $XLK $QQQ,” Lee mentioned, referring to the mega-cap tech shares, the know-how sector, and the Nasdaq 100.