Pantera Capital founder Dan Morehead is forecasting an incoming correction in equities markets and a relative outperformance of crypto assets.
Morehead says via social media platform X that he believes the S&P500 is “massively overvalued” and due for a 23% fall.
The investor, who oversees $4.2 billion worth of assets at Pantera, says the Federal Reserve will likely have to continue raising interest rates in the face of surging wage inflation and a wave of workers strikes across the US.
He says a continued hiking schedule from the Fed will weigh down on stocks, bonds and real estate, so a “best-case scenario” would only be for prices to remain flat for some time.
What’s more likely, however, is a sizeable correction in the S&P 500 and an underperformance of equities, says Morehead.
“Another possible outcome is a very long period of flat prices. There are two periods of roughly 13 years that stocks didn’t go up:
Aug 2000 – Feb 2013
Nov 1968 – Aug 1982
That’s kind of like my ‘best case scenario.’
And then to complete the scenarios, I can definitely see a chance that equities revert to the average equity risk premium we’ve experienced in environments like this – rising rates.
Those two periods averaged +2.25% above bond yields. If equities repriced to that, they would fall 43%.
My central forecast is in gold below.”
The investor says that while stocks and other risk assets are likely due for a stagnant period, crypto and “real commodities” could be what outperform during that time.
“So what does this mean for blockchain assets?
We talk to asset allocators all the time. If you’re thinking of putting money to work in bonds, I think that’s pretty dangerous. Real estate is coming off all-time highs. Equities are overvalued. That does leave a couple of asset classes, like real commodities and blockchain assets.
Blockchain is a trillion-dollar asset class. Most institutions have essentially zero exposure right now. I believe they should dial it up to a couple percent.”
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