Wells Fargo on Bitcoin's Market Impact | WellsFargo CardHolders
This is analysis on Wells Fargo on Bitcoin's market Impact, people have been asking about speculation in the equity market, and I point to there's a significant amount of froth in the crypto markets.wellsfargo.com.
We're joined by Chris Harvey head of equity strategy for Wells Fargo securities, welcome to trading nation Chris, here's the question, Friday's big story was the drop in Bitcoin, and other cryptocurrencies are there, any risk of thought that a decline? if a continued decline, if we get one encrypt owes will impact the equity market.
I think there is a lot of froth, so people have been asking me about speculation in the equity market, and I point to the crypto markets, there's a significant amount of froth in the crypto markets, we do think that if that froth comes out, it will start to spill over, it's not going to happen in a vacuum, and we're starting to see us very small glimpse of that.
Today you're seeing technology down a little bit, not a lot, but a little bit, within technology to seeing series, heaviest series, a lot of the series are related to some of the cryptocurrencies, so again this is just a very small will, say blip or a bit of volatility, but if we see more of that, I would expect to see that volatility start to affect the equity, mark is there, any evidence, anywhere and Chris, you may not know, and I don't want to put you on the spot, but that the crypto buyers are the same people out buy equities, it seems like it's a totally different group of people, that people I just don't trust or whatever, they want cryptos, they're not selling stocks, to buy Bitcoin is my point, or do you think there is a cross-pollination there at all, I don't get involved to that degree in that market, so I can't, I would just be speculating on speculation.
I think that's a good point, I think that's a good idea, but I don't have the evidence to prove that out, one way I do know the only reason I ask is I wonder if the other side of it is that cryptos, if they continue to fall with that cash, that people are obviously selling, then go back into the equity market, kind of the flip side maybe, it's maybe could help stocks, it could but again, I wish I had that information, we just don't, but I understand that line of reasoning, and I see it at the end of the day, what we're worried about is froth coming out of that market, and that's starting to affect equities fare, reporting it a little bit, but just not to it a large degree, and it's something to watch out for 2018, we kind of threw this one on you, because of what's happened while we're taping this on Friday, let's get to what you are here, for which is what can happen the equity market next year.
You're reasonably optimistic, what are the biggest risks to your forecasts and to the equity market, let's start with the bad news first, so in a bad news, what we think about with the equity market, it's a first half, second half story we think the first half you're going to have, you'll have some positive spillover from 2017, however, in the second half of the market, what you're going to have to deal with, what the market will have to contend with is EPS, peaking is M potentially peaking, you're going to have the yield curve in all likelihood flattening, and in addition to that, you'll likely have multiple starts to compress, and we think in the second half, you're going to have to scratch and claw to stay afloat or to break-even.
So our fear is not so much the equity markets, just the timing of how things occur, and I want to be clear your target is 2863 on the S&P, about five or six percent up sites, you're not negative, you just see it's returning to more normalized for trimming, that's kind of the average return for the market,
I think that's right, I think what people have to do, if people ask me about Santa Claus rally and equities, and when I tell them, is I think there's been a Santa Claus rally all year long, this has been an incredible market, we're up 20 20 odd percent, and that's great and that's fantastic, but you have to lower your expectations for next year, a lot of good news is already priced in, and we just don't see that much, going forward it'll be a decent market, it just won't be a banner year, the Fed beat, the Grinch, I mean I would assume everyone knows there's probably three rate hikes next year, two to four.
Do you think three rate hikes are already priced into equities? Is the Fed though risking on the overshooting, or do you think no rate hike surprised it? No, if you look at some of the markets, it looks like about two rate hikes or priced in, with regard to them, the Fed overshooting at this point in time over the last few years, it has not paid to get too aggressive on the Fed, the Fed has been slow and steady and until they change or they give you some indication, they're going to do something different, I think that's a proper approach, and let's not forget there's going to be a handoff between Yellen and Powell.
How we'll have to be somewhat, we think they'll have to be somewhat conservative coming out, because he has to have the confidence in the market, has to build confidence from the marketplace, and so can't come out swinging in an environment, like that Chris Harvey head of equity strategy for Wells Fargo securities, Chris was a real pleasure to have you on.