Bitcoin’s recent performance is pointing to a potential short-term surge in the S&P 500, according to Tom Lee, head of research at Fundstrat Global Advisors.
He believes the cryptocurrency’s rebound strongly indicates that the broader equities market is positioned for further gains despite ongoing economic uncertainty.
Speaking in a recent market segment, Lee reiterated his bullish stance on the S&P 500, which recently reached his earlier target of 5500. He noted that Bitcoin trading above its April 2 level is a key signal that the S&P 500 could soon push toward 5800. Lee emphasized that Bitcoin typically leads risk assets, and that trend continues.
Positive macro signals support market outlook
As investors awaited the latest Federal Reserve decision, U.S. stocks saw minor pullbacks, but Lee suggested the market has already found its bottom. He stated that fears related to tariffs, which peaked in early April, have now subsided. In his view, This shift in sentiment contributes to a more stable macro environment.
Lee also pointed to credit markets and volatility indexes as supportive indicators. Since April 7, high-yield bonds have recovered most of their earlier losses. Additionally, the inverted VIX term structure suggests reduced volatility expectations, which Lee sees as a positive sign for equities.
Bitcoin and equities show resilience
Lee highlighted the resilience of both companies and financial markets over the past few years. He noted that corporations have managed to weather significant disruptions including the pandemic, inflation, and rapid interest rate hikes. According to Lee, these challenges have tested the strength of the market, and the ability to adapt has been proven.
He mentioned that several key assets recently weighed on the market, such as Tesla, the Magnificent Seven, and Bitcoin, show signs of recovery. Bitcoin, in particular, has already moved past its early April price, which Lee believes strengthens the case for more upside in equities.
Calls for fed action grow as ECB moves ahead
Lee criticized the Federal Reserve for maintaining higher interest rates while the European Central Bank has already begun cutting. He pointed out that if U.S. inflation were measured without shelter costs, it would likely appear lower than Europe’s. Despite this, U.S. rates remain tighter by 125 basis points.
The problem of potential political influence on Federal Reserve Chair Jerome Powell arises from fears that the current economic conditions could lead to criticism about an economic slowdown alongside falling inflation. According to Lee, the present market dynamics warrant interest rate reductions before the complete tariff effects become apparent.