Introduction
Michael Hartnett, chief strategist at Bank of America (BofA), warns that the U.S. stock market and crypto market may be overvalued. In a recent interview with Bloomberg, he stated that the S&P 500 could “overshoot” if the market climbs to 6,666 points, which is 10% above current levels. As a result, such a sharp rise in the market could trigger a bubble as early as 2025.
Signs Point to a Stock Market Bubble
Data from Bloomberg shows the S&P 500 price-to-book ratio is now 5.3 times. This figure is near the record high of 5.5, set during the tech bubble in March 2000. Despite the surge, investors remain calm. Bank of America’s bull-and-bear indicator reflects this mood. However, experts warn this calm may not last if the market continues rising. The S&P 500 has risen 27% this year, its best performance since 2019. Much of this growth comes from excitement over AI advancements and Trump’s “America First” policies.
Bitcoin Market Surges to $104,000
At the same time, Bitcoin crossed $100,000, hitting a high of $104,000. Hartnett credited Trump’s support for crypto as one reason for the rise. Bitcoin’s market value now exceeds $2 trillion, ranking it as the 11th-largest economy globally. Ruslan Lienkha, head of markets at YouHodler, says the rally is driven by FOMO (fear of missing out). He predicts Bitcoin could hit $110,000–$150,000 if no major disruptions occur. However, he warned that external risks, such as economic shifts, could slow the climb.
Stocks and Crypto Markets Move Together
Bitcoin and U.S. stocks remain closely connected. When global stock prices rise, Bitcoin often follows. For example, the recent “Christmas rally” pushed the S&P 500, Nasdaq, and Germany’s DAX index to new highs. Lienkha cautioned that the current bull run may be nearing its peak. Rising interest in altcoins signals that retail investors are driving the market. Historically, this behavior often signals the final stage of a bull cycle.
Key Risks for 2025
Looking to 2025, Lienkha outlined key risks for Bitcoin. These risks include:
- Negative signals from the U.S. economy.
- A potential drop in global stock markets.
- Increased volatility from leveraged retail trading.
Since Bitcoin mirrors the stock market’s performance, any equity slowdown could lower Bitcoin prices. Therefore, investors should prepare for sudden market shifts and remain cautious.
Conclusion
In conclusion, Hartnett’s warning highlights real risks in both crypto and stock markets. While prices hit record highs, the risk of overvaluation grows. Bitcoin’s surge and the S&P 500 rally reflect strong investor optimism. However, as experts suggest, market corrections are likely. Investors should stay alert for shifts and remain ready for any downturns.
