Bitcoin's 15% Rebound Signals Stock Market Recovery

Fundstrat’s Tom Lee has indicated that Bitcoin (BTC) is signaling a potential recovery for the stock market. In a recent interview, Lee noted that Bitcoin has rebounded to levels not seen since before President Trump announced tariffs on April 2nd. This recovery in Bitcoin suggests that the stock market may also experience a significant rebound.

Lee believes that companies have demonstrated resilience in managing through various shocks, including the COVID-19 pandemic, inflation surges, and rapid interest rate hikes by the Federal Reserve. He suggests that this resilience will likely lead to earnings outperforming expectations, despite the recent tariff shock. Lee also points out that key indicators such as Tesla, the Magnificent 7, and Bitcoin have begun to recover, with Bitcoin trading above its April 2nd level. This recovery in Bitcoin, according to Lee, indicates that the S&P 500 could recover to around 5,800 in the near term, which represents further upside from its current level of 5,673.

Lee also discussed the potential for the Federal Reserve to start cutting interest rates sooner than expected. He noted that the US’s inflation data suggests that the Fed could increase market liquidity by cutting rates. Lee compared the Fed’s approach to that of the European Central Bank, which has been cutting rates despite tariff-induced inflation. He argued that if the Fed excluded shelter from its core inflation calculation, its inflation rate would be lower than Europe’s, and yet Fed funds are currently over 225 basis points tighter than Europe’s. This comparison supports the argument that the Fed should consider cutting rates now, even without knowing the full effects of the tariffs.