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Tom Lee sees the S&P 500 rising to 3,025 this year as 'animal spirits' drive business spending

  • Fundstrat's Tom Lee sees another big year for the market in 2018.
  • Lee is bullish on industrials and value stocks.
  • Fundstrat's forecast ranks as the third-highest in the latest CNBC Market Strategist Survey.
A Caterpillar 330DL track excavator loads rocks for a road construction project.
Daniel Acker | Bloomberg | Getty Images
A Caterpillar 330DL track excavator loads rocks for a road construction project.

Fundstrat's Tom Lee predicts the market will have another double-digit percentage gain this year.

"We are constructive on stocks in 2018, driven by earnings growth of +13% and slight P/E expansion, supported by strong global growth (tempered by rising core inflation)," Lee wrote in a note to clients Thursday.

Lee shared his five major investment themes for this year:

1. "Animal spirits driving upside to capex."
2. "Millennials entering prime income years."
3. "Rising core inflation."
4. "Automation given structural labor shortage."
5. "Blockchain innovation."

"We have highlighted styles and sectors that are positively leveraged to each theme. In short, we favor Value (over Growth) and Cyclicals," he added.

The strategist gave a 3,025 year-end price target for the S&P 500, representing 10 percent upside to Wednesday's close. The market rose 19 percent in 2017.

Fundstrat's forecast ranks as the third highest in the latest CNBC Market Strategist Survey.

"I think P/Es are definitely expanding. … I think it has a lot to do with demographics," Lee said on CNBC's "Halftime Report" Thursday. "The millennials, which is almost 30 percent bigger than the boomers, are just starting their prime income years, so that's going to be runway till 2036."

Lee noted the recent rising purchasing managers' index numbers from Germany, Japan and the U.S., which signal strength in the manufacturing economies of developed countries.

"This is an example of the combination of pent-up demand and rising animial spirits leading to an accelerating global GDP picture," he wrote.

Fundstrat has overweight ratings on the industrials, technology, materials, energy, financials and telecom/media sectors.

To take advantage of the call, here are six industrials stocks in the Russell 1000 Value Index Fundstrat recommends.