Fundstrat's Tom Lee says Bitcoin's rise above $100,000 is a bullish signal for stock investors. The longtime crypto bull said investors are showing appetite for risk assets. Lee sees the S&P 500 rising to 6,300 by the end of the year, suggesting 3% upside.
Bitcoin's passing over a major milestone is also a sign that investors are on the verge of year-end stock gains, said Tom Lee, head of research at Fundstrat.
Lee, who has been calling for Bitcoin to reach $100,000 since the beginning of 2021, said that Bitcoin finally reaching six digits is a positive sign for stocks. The reason is that the rise in Bitcoin shows investors are increasing their appetite for risk assets, which will also increase demand for stocks, he said.
He also noted that as yields remain cyclically high, traders are starting to put the money they have into use, noting the $6 trillion worth of money stashed in money market funds. He added that it shows.
Lee predicted the S&P 500 index could reach 6,300 by the end of the year, suggesting an additional 3% rise from current levels.
“This really shows that we investors are willing to take risks. It also shows how much capital has been sitting as cash in money markets over the past few years, or whether the economy will survive. I think it just shows that it's been idle, either waiting to see what happens,” Lee told CNBC. on Thursday.
“So I think the rise in Bitcoin, to me, the break out of the holding pattern is a harbinger of what the S&P will do for the rest of the year.
Mr Lee warned that the benchmark index may face some challenges in the final period of the year, pointing to potential fluctuations resulting from November's employment report and consumer price index. These reports provide important data points for central bankers ahead of their next interest rate decisions and can also cause temporary fluctuations in stock prices.
“So I think once we get past these events, investors can actually invest in Christmas and Santa Claus gatherings,” Lee said. “So I think 6,300 people is still very achievable.”
Mr. Lee predicted a bullish backdrop for stocks over the next few years, adding that he expects the Fed to cut interest rates by a quarter of a point at least eight more times during this easing cycle.
Fed Chair Jerome Powell said central bankers have room to be more “cautious” in lowering interest rates, given the strength of the U.S. economy. But Lee said even if next year's rate cuts are smaller than expected, it would only lengthen the Fed's overall rate-cutting cycle, which would still be a bullish path for stocks.
“Going into 2025, I think the market will shift to thinking that the best case is to cut interest rates as little as possible next year to prolong the dovish cycle. So I think we need to flip the scenario. But it will be.'' Take a moment. ”
Mr. Lee is known for his consistently bullish outlook on Wall Street, and has had mixed success in recent years predicting higher stock prices. His prediction that stocks would rise 20% in 2023 was correct, but his prediction that stocks would reach a new record in 2022 was not correct, although the S&P 500 entered a bull market that year. It actually ended the year down more than 25%.
