Crypto Price Bull Run - Top CIO Says It is Too Early to Pile Into Bitcoin and Meme Stocks, Is he Right

The crypto market has started the year on a positive note. The total crypto market capitalization is back above the $1 trillion mark. The easing interest rates have made risk assets more attractive to investors. However, according to Keith Lerner, the co-chief investment officer at Truist Wealth, there is not enough liquidity in the market to sustain the uptrend.

Top CIO believes it is too late to pile on Bitcoin

While speaking to the “What Goes Up” podcast, Lerner said that meme stocks usually performed well when liquidity was increasing. However, liquidity was fading away in the current period, making the trend unsustainable.

Lerner opined that the trend is different for the S&P 500. He noted that this index witnessed a correction in December amid intense selling. Therefore, the current gains in the S&P 500 index were attributed to a mean reversion that usually happened in January.

The Wall Street veteran further said that the markets could be fairly valued because of the correction witnessed last year. However, he opined that investors needed to remain defensive by investing in areas such as healthcare and energy as they had the potential to perform despite the current market conditions.

US recession is on the way

One of the main reasons that Lerner explained the need to adopt defensive strategies is the possibility of the US economy entering a recession. There have been talks of a possible global recession since the year started, with the World Bank also warning of the same.

He pointed to some factors that increase the risk of a recession, such as the over 4% year-over-year decline in the leading economic indicators and the housing market hitting a peak in 2022. However, he added that the data suggested that the economy was yet to enter a recession, which could happen later this year.

In 2022, the US Federal Reserve raised interest rates aggressively to tame the high inflation levels. Lerner opined that the aggressive increase in domestic and global monetary policy over the past four decades would hamper growth.

Lerner also addressed concerns about the outperformance of other countries against the US. He noted that while the earning trends in the US have been strong, growth has also been seen in other countries. Europe appeared to have handled the energy crisis well, while China is opening up again. China is one of the largest trading partners of Europe.

The last few months have also reported “one of the biggest outperformance periods in the last 20 or 30 years,” according to Lerner. Therefore, after a period of a major run triggered by a series of unexpected events, there is a likelihood that the markets will either consolidate or pull back.

The Federal Reserve is holding its next meeting towards the end of this month. A reversal could be on the way if the meeting yields another hawkish outlook. However, an indication that interest rate hikes will ease further will be bullish.

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