₿ The Great Bitcoin and Stock Market Divide

What’s on the Menu 🍴

It’s been a confusing month for investors…

With bitcoin dumping and Nvidia blasting to new all-time highs.

Will this continue, or will earnings season bring a new flavor?

Let’s go!

• The Great Bitcoin and Stock Market Divide ₿

• Is Tesla Stock Overheated? 🥵

• Mid-Year Review Of Risk Asset Returns 📅

• Bull Market Cancelled? Or Just Getting Started? 📺

Today’s newsletter is a 5 minute read.

The Great Bitcoin and Stock Market Divide ₿

For the first half of the year, Bitcoin and the S&P 500 were BFFs, moving in sync like they were in a three-legged race.

Bitcoin shot up from $40,000 to almost $70,000, and the S&P 500 was partying right alongside it.

But just like any good plot twist, things took a sharp turn in early June.

Suddenly, our two besties weren’t so chummy anymore.

The S&P 500 kept climbing, hitting new highs, while Bitcoin tripped and fell.

The culprit?

A spook from the ghost of Mt. Gox. News hit that around $9 billion worth of Bitcoin was about to flood the market, and investors panicked.

Bitcoin started its descent, testing support levels below $60,000 while the S&P 500 kept on shining.

The S&P 500 kept its groove going, thanks to stellar performances from big names like Nvidia and Apple.

So why the sudden break-up?

It’s all about what drives these markets. Stocks were boosted by solid earnings and optimistic forecasts, while Bitcoin got smacked around by regulatory concerns and major sell-offs.

The S&P 500 thrived on economic fundamentals and corporate earnings, but Bitcoin?

It's still at the mercy of market sentiment and the whims of major holders.

What's the takeaway?

This inverse relationship is a reminder of how different these two markets really are.

Stocks are like your stable, dependable friend who gets good grades and always shows up on time.

Bitcoin, on the other hand, is that unpredictable buddy who’s either throwing the party of the century or ghosting you entirely.

So, will Bitcoin and the S&P 500 patch things up and start moving together again?

Or are we in for more twists and turns?

Is Tesla Stock Overheated? 🥵

Back in late March, Tesla (ticker: TSLA) was the worst performing stock in the S&P 500 index up to that point of the year.

But wow has that performance flipped around lately, as TSLA is up almost 50% in the past month and up 30% since the start of July:

On July 2nd, Tesla reported Q2 electric vehicle deliveries of 443,956 versus market expectations of ~430,000.

And while Q2 deliveries were actually down 5% from last year, it was enough to shift investor sentiment.

TSLA stock has finished up on the day for 10 straight trading sessions, which got us wondering how unusual this streak might be.

So we turned to the data to see if TSLA stock had ever done this before…

It turns out that since 2010, TSLA stock has done this two other times, including a 13 day consecutive streak back in early summer 2023!

So this recent run is definitely unusual, but not unprecedented.

We also checked daily up streaks for the other “Magnificent 7” megacap tech stocks (going back to 2010) and here’s what we found:

Once again it seems that a 10-day run is not unheard of, but it’s certainly getting close to short-term overbought territory judging by historical data.

We wouldn’t be surprised to see the stock take a breather and consolidate ahead of TSLA’s earnings report on July 23rd.

Of course there’s likely to be some hype and excitement as we get closer to August 8th, when Tesla is going to unveil more details about its “robotaxi”.

There’s rarely a dull moment when it comes to both Tesla the company and TSLA the stock!

Mid-Year Review Of Risk Asset Returns 📅

We’re half way through the year if you can believe it (oh, how time flies!).

It’s a great time to review how the top risk assets have performed, and talk about where they may head from here.

Coming off of 2023, investors weren’t expecting much from the market. They thought recession was on its way and bonds may have been the best place to be positioned in a portfolio.

Of course now, we know that didn’t play out for the cohort of people who thought this way.

We talked a lot in 2023 on the We Talk Money podcast about the contrarian view and why the bear/recession case may NOT play out, and many of our thoughts came to fruition.

Risk assets, to clarify, are defined by their volatility.

When looking at year-to-date total returns (including dividends), things are looking pretty great overall:

Bitcoin is the best performing risk asset (are we surprised?) up +34% year-to-date. This is after being up roughly 150% in 2023! Impressive.

Of course, large cap stocks measured by the S&P 500 and Nasdaq have done well for investors. This is part of the problem we’re seeing today: investors who stayed in cash expecting a crash, are now having to chase an unexpected strong bull run in large cap stocks.

Again, this is after these indices already had impressive 2023 runs!

Oil has been a decent diversifier in a portfolio with positive YTD returns of 18%, however, 2023 left a lot to be desired. People thought China would be a huge tailwind for oil, but, their economy has been slower than anticipated.

Gold is hanging on to cumulative positive returns to add to 2023’s gains. This move has been surprising as gold typically has an inverse relationship with real rates (interest rate adjusted for inflation).

Video of the Day: Bull Market Cancelled? Or Just Getting Started? 📺

Bitcoin recently broke below its 200 day moving average… And investors are wondering - is this bull market cancelled or just getting started?

Click here to watch - We Talk Money Episode 149

You’ll also learn:

• What’s driving the stock market to all-time highs

• Why bitcoin pulled back 27%

• How to analyze this macro environment

• And we answer your questions!

Food For Thought 🧠

"The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.”
- Seth Klarman

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.