Consider reducing exposure to US stocks and Bitcoin, this analyst says

Investing.com — Investors should consider paring down their positions in US equities and Bitcoin, according to a market commentary from US Tiger Securities, Inc.

While the US economy shows stability, the firm warns that elevated valuations and rising risks make these assets less attractive heading into 2025.

The firm said the CAPE (Cyclically Adjusted PE Ratio) ratio for US stocks has surpassed its 2021 highs, nearing levels last seen during the dot-com bubble.

Historically, such valuations are sid to have signaled heightened correction risks. The firm says that for example, in the early 2000s, the S&P 500 fell by over 50% from its peak and took seven years to recover.

While it’s impossible to predict whether 2025 will bring a correction or continued gains, the commentary firm notes that probabilities no longer favor investors.

They explain that the risks are compounded by potential policy uncertainties under the incoming administration, such as aggressive tariff measures, immigration policies, and the impact of the strong dollar on US exports.

Additional geopolitical and macroeconomic concerns, including Japan’s rate hikes and global retaliatory measures, further cloud the outlook.

Bitcoin, which has soared above $90,000, faces similar challenges. US Tiger Securities says that realized profits from Bitcoin sales have hit historic highs, a pattern typically associated with market peaks.

Furthermore, they believe a significant sell-off by long-term holders and heightened FOMO (fear of missing out) sentiment signal potential exhaustion in the current rally.

“Reducing positions now might be prudent,” the firm advises, noting the deteriorating risk-reward profile for both US equities and Bitcoin.

“With market uncertainty rising, the risk-reward profile is less attractive,” says Tiger Securities. “The current sell-off rate is approaching March’s levels, further supporting the notion that Bitcoin may have topped.”