By Bitcoin surpassing a major milestone is one sign investors are also about to see a year-end stock surge, according to Fundstrat’s head of research Tom Lee.
Lee, who has called for bitcoin to reach $100,000 since the start of 2021, said the crypto finally hitting six-figures was a positive sign for equities. That’s because the rally in bitcoin is illustrative of how investors are building up their appetite for risk assets, he said, suggesting they would also ramp up demand for stocks.
Traders are also showing that they’re starting to deploy their sidelined cash, he added, referring to the $6 trillion traders have stashed away in money market funds while yields remained at cyclical highs.
Lee predicted the S&P 500 could hit 6,300 by the end of the year, implying another 3% upside from current levels.
“It’s really telling us investors are pro-risk. I do think it also just signals how much capital has been idle for the last couple of years, either parked in money market cash or waiting to see if the economy survives,” Lee told CNBC on Thursday.
“So I think bitcoin rising is — to me, breaking out of a holding pattern is a precursor to what the S&P is going to do the rest of the year.
The benchmark index could face several challenges in the last stretch of the year, Lee warned, pointing to potential volatility stemming from the coming November jobs report and consumer price index. Those reports will serve as key data points for central bankers ahead of their next interest rate decision, which could also spark a temporary swing in stock prices.
“So I think, once we’re through these events, investors can actually then invest into that Christmas, Santa Claus rally,” Lee said. “So I think 6,300 is still very doable.”
Lee has forecast a bullish backdrop for stocks in the coming years, adding that he sees the Fed cutting interest rates a quarter-point at least eight more times in this easing cycle.
Fed Chair Jerome Powell has said central bankers have room to be more “cautious” in lowering interest rates, given the strength of the US economy. But fewer rate cuts than expected next year would still result in a bullish path forward for stocks, Lee said, as it would just prolong the Fed’s overall rate-cutting cycle.
“I think as we get into 2025, the market’s going to shift to thinking: the fewest cuts possible next year is the best-case, because it elongates the dovish cycle. So I think we have to flip the script, but it’s going to take some time.”
Lee, known for his persistently bullish forecasts on Wall Street, has predicted stock run-ups with varying success in recent years. He nailed his prediction that stocks would rally 20% in 2023, but missed when said stocks would climb to fresh records in 2022, the year the S&P 500 entered a bull market actually ended down over 25% for the year.
