US assets may have peaked, warn banks

Bloomberg and staff reporter

Major investment banks are warning that the greenback, US stocks and crypto may have peaked.

Yet, some say bitcoin could surge to above US$200,000 (HK$1.56 million).

Morgan Stanley has shifted to a bearish outlook on the US dollar, despite its gains following Donald Trump's victory in the presidential election.

It said the US economy remains strong, but the US dollar's positive factors are fully priced in. It also said that the market may overreact to trade policy changes and be overly conservative about Federal Reserve rate cuts while overestimating cuts by foreign central banks.

The US stock market accounts for half of the global stock market capitalization, as global funds accelerate their flow into US stocks.

A powerful rally in US stocks as well as cryptocurrencies has left the asset classes looking frothy, according to Bank of America's Michael Hartnett.

The S&P 500's price-to-book ratio has surged to 5.3 times in 2024, approaching the record peak of 5.5 in March 2000 during the height of the technology bubble, according to data compiled by Bloomberg.

BofA's Hartnett said there's a high risk of "overshoot" in early 2025 if the S&P 500 nears 6,666 points - about 10 percent above current levels. The bank's bull-and-bear indicator shows no sign of exuberance among global investors yet.

The strategist took a more neutral tone on equities this year after remaining bearish in 2023.

The S&P 500 has surged about 27 percent in 2024 and is tracking its best year since 2019 on optimism around artificial intelligence and wagers that president-elect Donald Trump's "America First" policies will boost domestic markets.

His support for crypto also helped Bitcoin briefly rally past US$100,000 this week.

Hartnett said that with a market capitalization of over US$2 trillion, bitcoin was comparable to the 11th largest economy in the world.

Bernstein Research sees bitcoin reaching a cycle high of US$200,000 by the end of 2025, driven by regulatory certainty and increased institutional adoption.