Bitcoin’s peak could be a harbinger of a stock market top next, Stifel says

A bitcoin top could signal trouble for stocks – and a shift in market leadership, according to Stifel. According to Barry Bannister, Stifel’s chief equity strategist, there’s evidence the cryptocurrency may be peaking, which could lead to a pullback in investor sentiment, weaker Big Tech stocks, and a rotation into value, he said in a note Wednesday. “Bitcoin & Nasdaq 100 reflect the speculative fever fostered by cheap money after dovish Fed pivots, such as occurred 4Q 2023,” Bannister said. “We show that if Bitcoin reflects euphoria after a dovish Fed, it is notable that Bitcoin (and the fever) may be peaking.” BTC.CM= YTD mountain Bitcoin, YTD “Investor mania around bitcoin coincides with extreme equity bullishness, which typically means equity indices are overbought and vulnerable to pullbacks,” he added. Bitcoin hit a new all-time high on March 14 after running up 71% since the start of the year, and has been trading in a roughly 7% range since then as investors take profits and digest the recent gains. Shortly after, on March 28, the S & P 500 reached a new intraday all-time high . .SPX YTD mountain S & P 500, YTD If was indeed its peak, that could mean a weaker Nasdaq 100 for six months, Bannister said. Other implications he highlighted include weakness in Big Tech Nasdaq stocks and a pullback in investors sentiment with a year-over-year change in S & P 500 performance. Additionally the S & P 500, which is cap weighted, could struggle against the equal-weight S & P 500 for about six months. “When the equal-weighted S & P 500 out-performs the S & P 500, then value tends to out-perform growth,” he said. —CNBC’s Michael Bloom contributed reporting.