Bitcoin is poised to surpass stocks and bonds once more following a period of underperformance relative to Wall Street. Former Credit Suisse global head of portfolio and Risk Dimensions CIO Mark Connors states that bitcoin has emerged from its longest historical stretch of underperformance and is set to outshine stocks, bonds, and gold as inflation remains persistently high.
What to know:
— Bitcoin appears to be entering a new phase of outperformance against traditional investments after concluding its longest-ever period of underperformance against the S&P500 in early May, as noted by investor Mark Connors.
— Connors suggests that ongoing inflation, consistently elevated oil prices, and a “higher-for-longer” interest-rate scenario are putting pressure on bonds and could benefit bitcoin compared to both equities and fixed income.
— He mentions that investors are transitioning from gold to bitcoin and asserts that advancements in technology, especially AI and blockchain, are crucial in combating inflationary pressures.
Connors, who previously served as the global head of portfolio management at Credit Suisse, remarked that bitcoin recently broke free from its historically longest period of underperformance against the S&P 500, which lasted 142 days and ended in early May.
“I believe bitcoin’s underperformance relative to markets has concluded,” Connors shared in an interview. “It’s transitioned from a consolidation phase into one of outperformance.”
This transition occurs as investors face stubborn inflation, rising oil prices, and uncertainty surrounding interest rates. Connors posited that bonds, typically regarded as defensive investments, are facing increasing pressure as markets adapt to a “higher-for-longer” interest-rate landscape.
“Bitcoin, as is often the case, takes initial hits, but eventually emerges as a leader,” he noted, suggesting that bitcoin may continue to outperform both equities and fixed income “as we navigate through a landscape of negative news and persistently high oil prices.”
Connors linked much of the current macroeconomic climate to ongoing geopolitical tensions and elevated energy costs. He indicated that oil prices have remained structurally high this year, contributing to inflation worries while prompting markets to focus on technological advancements and productivity improvements as a counterbalance.
He argued that AI and blockchain are increasingly intertwined as companies seek decentralized systems to facilitate machine-driven transactions and automation.
“The sole way to break through that inflationary pressure is via technology,” Connors stated.
He also highlighted a shift in investor preferences from gold to bitcoin. Connors drew parallels between the current situation and 2020, when gold initially excelled during the early pandemic stages before bitcoin began a significant recovery.
“Gold has had its moment,” he remarked. “Bitcoin is now poised for its comeback.”