One expert outlines the crucial lines in the sand for carefully followed assets when the so-called “bro bubble”—the testosterone-fueled boom in cryptocurrencies and other speculative tech stocks—pops.
According to Michael Hartnett, a strategist at Bank of America, the price of bitcoin (BTCUSD) broke when it was unable to maintain the volume-weighted average price of $97,000 since the election. It has now dropped below $80,000. Tesla Inc. (TSLA) closed Thursday at $282, well below its post-election VWAP of $371.
In addition, Hartnett found the VWAP lines in the sand for Meta Platforms Inc. (META) at $639, Palantir Technologies Inc. (PLTR) at $80, the Nasdaq 100 ETF QQQ at $519, and the S&P 500 ETF SPY at $597.
He stated that the first strike price for a so-called Trump put is 5,783 on the S&P 500 SPX, as that would be the starting point for the headline “Stocks Down Under Trump”—”below which investors currently long risk would very much expect and need some verbal support for markets from policymakers.”
The iShares Core S&P Small-Cap ETF IJR is the most crucial price to monitor, according to Hartnett; if it is unable to surpass its 2021 highs in spite of a favorable environment of tariffs, tax breaks, deregulation, and maybe Fed cuts, it “tells you bonds outperform stocks.”
According to Bank of America’s study of fund flows, gold and stocks saw record weekly inflows of $4.7 billion and $27.2 billion, respectively, while cryptocurrencies saw $2.6 billion.
During the year, the greatest inflow into U.S. stocks was $26.9 billion.
Private customers of Bank of America behaved somewhat differently, with the second-largest week of T-bill sales since 2012 and the second-largest week of equity sales on record.
In addition, Hartnett described some of his discussions with clients in London and Dubai.
Although the investors appeared wary of the S&P 500, many believed that European equities were a “rent” rather than a “own.” Long-term bonds drew them in just as much as they have this decade.
According to Bank of America’s monthly fund-manager poll, Hartnett said that narratives and moods are changing more quickly than positions.
