Wells Fargo’s Top Analyst Predicts End of Stocks Bear Market – What Does This Mean for Cryptos?

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Fredrik Vold

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June 26, 2023

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A top analyst at the major US bank Wells Fargo has predicted that the bear market in stocks is over for now – a prediction that could also be good news for crypto.

According to Chris Harvey, a highly respected equity strategist at Wells Fargo, the latest pullback seen in the yield of investment-grade corporate bonds is “inconsistent” with an extended bear market in the important S&P 500 stock index.

The S&P 500 often serves as a proxy for the overall risk appetite in the market, and major trend changes in this market could, therefore also spill over to the crypto markets.

The analyst said strong balance sheets for both corporations, and at the consumer, level means that the downside risk for the stock market now is smaller, with no catalysts remaining for large moves to the downside.

The outlook was shared by Harvey in a note to clients seen by Bloomberg and reported on Monday.

Narrowing credit spreads

Harvey added that narrowing credit spreads seen recently also indicate that the bear market is likely over.

“Bear markets often end when we see sharp tightenings and healthy issuance similar to what we have experienced over the last several months. When bear markets go ‘next level’ spreads widen, not tighten, as they have today,” Harvey wrote in the note, according to Bloomberg.

The narrowing spreads “support our views on systemic risk,” he added.

Harvey now has a year-end target for the S&P 500 of 4,200, which puts his target just 1.5% above Monday’s closing price. The analyst is, in other words, not overly bullish on stocks for this year, although he believes the worst to be over.

The bull remains “stuck in traffic,” Bloomberg quoted Harvey as writing in his new note.

Disbelief remains mainstream view

Meanwhile, Bloomberg also pointed out in the article that a survey among users of its Markets Live product from late January of this year found that 70% of respondents believed the stock market had not yet bottomed. That was despite the S&P 500 having already fallen 25% from its peak a year earlier.

The S&P 500 has continued to rise since the survey was conducted, and is currently down by about 14% from its peak in early January this year.

A similar story can also be seen in Bitcoin (BTC) and the broader crypto market, where many seem to believe that the major digital assets have further to fall before we can call an end to the bear market.