Key takeaways:
– UBS analysts downgraded US stocks to neutral, citing rich valuations, a weakening dollar and policy risks despite AI-driven earnings growth.
– Limited S&P 500 upside could redirect capital toward Bitcoin, especially if major companies or sovereign funds allocate to BTC or ETFs.
Bitcoin (BTC) slipped below $65,500 on Friday, erasing gains from earlier in the week. The correction tracked intraday S&P 500 moves after stronger-than-expected US wholesale inflation data spurred risk aversion. UBS’s downgrade of US equities likely accelerated demand for safer fixed-income assets.
Investors worry a severe downturn in US equities could push Bitcoin to new yearly lows, though Bitcoin’s long-term path need not hinge solely on the tech sector. UBS’s global equity strategy team argues US stocks are no longer attractively valued versus other regions, highlighting a 35% premium to global peers versus a 4% average since 2010. They pointed to a weakening dollar, policy uncertainty—proposals to cap credit card rates, additional import tariffs and limits on private equity in housing—and waning effectiveness of corporate buybacks as asymmetric downside risks. Still, UBS retains a year-end S&P 500 target of 7,500 and sees AI supporting earnings growth.
Friday’s US Producer Price Index rose 0.5% in January month-over-month. Inflation surprises like this make rate-cut expectations less certain; tighter policy keeps credit costly and dampens corporate expansion. The US 10-year Treasury yield, a gauge of investor risk appetite, fell to about 3.97% from 4.21% three weeks earlier, signaling a flight to government bonds despite better-than-expected corporate earnings.
If S&P upside is constrained, capital might rotate into alternative stores of value. Gold already sits at a roughly $36.5 trillion implied market capitalization, while the 10 largest tech firms total about $24.2 trillion. Even a 52% Bitcoin rally to $100,000 would represent only about a $2 trillion market cap, leaving substantial room for inflows if investors seek non-equity exposure. That said, unless fixed income or real estate soak up rotation, Bitcoin remains a plausible beneficiary.
Sentiment could turn decisively positive if major corporations or sovereign funds publicly add strategic BTC holdings, whether directly or via spot ETFs. Historical examples show how a single high-profile corporate allocation can shift trader risk perception—Tesla’s past Bitcoin disclosure is a noted instance. Until similar announcements occur, on-chain decoupling from US equities seems unlikely.
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