如今Currently, the 10-year US Treasury yield is about 4.43%, far higher than 1.5% in December 2021. Analysts believe that the current higher borrowing costs raise market risks. If corporate profits fail to meet expectations, or Trump fails to deliver on his promise to create a national Bitcoin reserve, the stock market and Bitcoin may be in trouble.
As the price of Bitcoin approaches the 0.1 million dollar mark, its rising momentum has not only spurred shares of crypto-related companies to soar, but has also raised concerns that the stock market may be overheated: is it repeating the 2021 carnival? Is 2022 still far from a big drop?
The market frenzy of 2021 brought investors short but huge gains, but then triggered a brutal bear market, and many new entrants suffered huge losses.
Today, valuations in some stock market sectors are once again unusually high, such as the online used car retailer Carvana. The stock price has risen 430.71% so far this year, and the valuation of the S&P 500 index has also climbed more than 22 times the expected profit for the next 12 months for the first time since 2021.
George Cipolloni, portfolio manager at Penn Mutual Asset Management, said:
“My concern is that the market will experience another round of unsustainable madness and people will be hurt. Although it is difficult to say whether market fervor has reached dangerous levels, what is certain is that compared to a month ago, the level of enthusiasm and bubble in the market has increased markedly now.”
Investors' optimism may have come close to “excessive,” according to some Wall Street sources quoted by MarketWatch on Friday. Citigroup's Levkovich Index, which measures stock market sentiment, has risen sharply over the past few weeks, prompting the bank to include sentiment factors as one of the reasons to “be cautious about the future direction of the market.”
However, although some current trading behavior is similar to 2021, the macroeconomic context of that year is quite different from the current one.
Interest rates and bond yields were at historically low levels in 2021. Currently, the 10-year US Treasury yield is about 4.43%, far higher than 1.5% in December 2021. Mohannad Aama, portfolio manager at Beam Capital Management, said that the current higher yield has undoubtedly increased market risk.
At the same time, neither the stock market nor Bitcoin “succumbed” to the pressure of higher borrowing costs, but instead rose, fueled by enthusiasm for the “Trump deal.” But it also makes the prices of both assets too perfect, which means that if corporate profits fail to meet investors' expectations, or if President-elect Trump fails to deliver on his promise to create a national Bitcoin reserve, these two markets may be in trouble.
On Friday, the US stock market collectively closed higher. The S&P 500 index, NASDAQ index, and Dow Jones index all achieved gains during the week, and the Dow set a new closing record. Aama said:
“The S&P 500 index and the Nasdaq index all reflect a lot of good news. If this good news doesn't come true, then it's troublesome.”
