A top analyst at a major US bank Wells Fargo predicted that the bear market in stocks is over for now – a prediction that could be good news for crypto as well.
The latest pullback seen in investment-grade corporate bond yields is “inconsistent” with an extended bear market in the important S&P 500 stock index, according to Chris Harvey, highly respected equity strategist at Wells Fargo.
The S&P 500 often serves as a proxy for the overall risk appetite in the market, and major trend changes in this market can also spill over into crypto markets.
Strong balance sheets at both the corporate and consumer levels mean that downside risks to the stock market are now small, with no catalyst remaining for a bigger move, the analyst said.
The outlook was shared by Harvey in a note to clients seen by Bloomberg and informed of on Monday.
narrow credit spreads
Harvey said the narrowing of credit spreads seen recently also signals that the bear market is likely to be over.
“Bear markets often end when we see sharp tightening and healthy exits similar to what we’ve experienced over the past several months. According to Bloomberg, Harvey wrote in the note, “When bears go to the ‘next level,’ it spreads, not tightens.”
He said the narrowing spread “supports our views on systemic risk”.
Harvey now has a year-end target for the S&P 500 of 4,200, which puts his target just 1.5% above Monday’s closing price. Analysts, in other words, aren’t overly bullish on stocks for this year, though they believe the worst is over.
Bulls remain “stuck in traffic,” Bloomberg quoted Harvey as writing in its new note.
Disbelief remains the mainstream view
Meanwhile, Bloomberg also reported in the article that a survey among users of its Markets Live product at the end of January this year found that 70% of respondents believed the stock market had not yet bottomed. . This was despite the S&P 500 having fallen 25% from its peak just a year earlier.
The S&P 500 has continued to rise since the survey was conducted, and is currently down about 14% from its peak in early January of this year.
A similar story can be seen in bitcoin (btc) and the broader crypto market, where many believe the major digital asset will decline further before ending the bear market.
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