If the cryptocurrency prosper goes bust, Wells Fargo Securities believes stocks could clearly get dragged into the chaos.
Christopher Harvey, the firm’s head of even-handedness strategy, is paying close attention to the unprecedented activity in what could be one of the ton epic bubbles of all time.
“There is a significant amount of froth in the crypto shops. We do think that if that froth comes out, it will start to spillover,” he advised recently on CNBC’s “Trading Nation.”
Bitcoin and its peers have been notice wild price swings seen over the past week. Final week, bitcoin lost one third of its value in a single day before returning. That capped days of volatility which saw the digital currency roll to a new record near $20,000.
“What we’re worried about is froth coming out of that demand, and that’s starting to affect equities,” said Harvey. “You’re seeing it a dollop bit, but just not to a large degree. And, it’s something to watch out for in 2018.”
Harvey has a 2863 S&P 500 Listing year-end price target for 2018 — about a six percent gain from Friday’s shut up. It comes far below the 20 percent gains Wall Street has seen so far this year.
“You have on the agenda c trick to lower your expectations for next year. A lot of good news is already valued in, and we just don’t see that much going forward. It’ll be a decent market, it reasonable won’t be a banner year,” he said.
Harvey sees the first half of the year stronger than the second-best. By then, he predicts stocks will come up against new challenges — whether the crypto buy implodes or not.
“What the market will have to contend with is EPS [earnings per slice] peaking, ISM potentially peaking, you’re going to have the yield-curve in all likelihood out — and in addition to that, you’ll likely have multiples start to compress, ” Harvey communicated. “You’re going to have to scratch and claw to stay afloat for it to break rounded off.”