Investing.com — Investors should consider reducing their positions in U.S. stocks, according to market commentary from US Tiger Securities, Inc.
Although the U.S. economy has shown stability, rising valuations and increased risks will make these assets less attractive heading into 2025, the firm warned.
The company said the CAPE (cyclically adjusted P/E) ratio for U.S. stocks has surpassed its 2021 high and is close to levels last seen during the dot-com bubble.
Historically, such valuations have been thought to indicate increased correction risk. In the early 2000s, for example, it fell more than 50% from its peak and took seven years to recover, according to the company.
While it is impossible to predict whether 2025 will bring a correction or a continued rally, commentators note that the odds are no longer in investors' favor.
They explain that the risks are further exacerbated by potential policy uncertainty under the incoming administration, including aggressive tariffs, immigration policy, and the impact of a strong dollar on U.S. exports.
Further geopolitical and macroeconomic concerns, including interest rate hikes in Japan and global retaliatory measures, further cloud the outlook.
Bitcoin, which has soared above $90,000, faces similar challenges. Tiger Securities said realized gains from Bitcoin sales have reached historic highs, a pattern that typically accompanies market peaks.
Additionally, they believe that heavy selling among long-term holders and rising FOMO (fear of missing out) sentiment suggest that the current bull market may dry up.
The firm notes the deteriorating risk-reward profile of both US stocks and Bitcoin, advising that “reducing positions may be prudent now.”
“As market uncertainty increases, the risk-reward relationship becomes less attractive,” Tiger Securities said. “The current rate of decline is close to March levels, further supporting the idea that Bitcoin may have surpassed its all-time high.”
