Here’s Why I Sold the S&P 500 and Bought More BTC

Here’s Why I Sold the S&P 500 and Bought More BTC

On Monday morning, I sold my entire long exposure to the S&P 500 index. I transferred the proceeds into the BlackRock bitcoin exchange-traded fund (IBIT).

While we might have one more pump in equities ahead of us, I believe the risk/reward ratio of holding the S&P 500 is far too high for me to stomach.

Even if we assume the entire trade war gets fixed tomorrow and interest rates get cut, I still believe bitcoin will far outpace any gains from the S&P.

I’ll explain why I believe that in a moment.

Longtime readers know I’ve been wildly bullish on U.S. equities since 2014. In October of that year, I gave a presentation at an investor summit predicting a massive bull market for stocks.

I shared research on a coming demographic shift that predicted at least 10 years of above-average earnings growth and would lead to above-average stock market returns.

My research suggested we were about to enter a bull market for U.S. equities that would last to at least 2025. At the time, I was ridiculed for being so bullish.

However, the prediction I made in late 2014 proved stunningly accurate.

I don’t expect that success to prevent me from being ridiculed today for now being bearish.

Back in October 2014, the S&P 500 was at 1,950. Assuming you bought it and reinvested the dividends, you would have made about 254%.

I told the audience that all you had to do was buy the S&P 500 and just go about your life and forget about the market.

During every step of that bull market, my bullish stance was questioned, doubted, and made fun of.

I explained in 2014 that every pullback should be viewed as a buying opportunity. That no matter how bad it got, all you had to do was buy the dip.

Over the following 10 years, there were plenty of opportunities for me to get bearish and throw in the towel on my prediction.

Instead, I put my faith in my research and stayed bullish on the S&P 500 through the Chinese devaluation scare of 2015... the Brexit scare in 2016… the Q1 and Q4 panic of 2018 when the S&P 500 dropped 10% and 20%, respectively… The COVID-19 crash of 2020… And the regional bank crash of March 2023.

So after all of that, why would I go bearish now?

Here’s why…

Unless trade tariffs are completely abandoned (a highly unlikely scenario), it means the cost of doing business will rise.

That means corporate profit margins will shrink. Corporations will have to absorb much of these increased costs because the U.S. consumer doesn’t have the ability to pay higher prices.

That means earnings growth must slow down. Even after a 16% decline in the S&P 500, forward earnings are still pegged at 19.2 vs. a historical average of 15.8.

An earnings slowdown means the market will get more expensive over time, even if it recovers to its old price levels.

Let me be clear: This earnings slowdown will not happen right away.

The earnings slowdown might not show up for a quarter or two as people rush to make purchases before the tariffs kick in.

All of that pre-purchasing will mask just how weak corporate earnings will become. This “pull forward” in demand will ultimately lead to an earnings cliff where corporate earnings just collapse.

I don’t like being bearish. It's not in my nature.

But you know what I like less?

Losing money.

The question for me isn’t if the S&P 500 will recover. Eventually, of course, the S&P 500 will come back and make new highs. But when?

When the last secular bull market peaked in the year 2000, the S&P 500 didn’t make a new inflation-adjusted high until 2013.

I’m 54 years old. I’ll be 67 in 13 years. I’m not going to postpone my life for 13 years while I wait for the S&P 500 to come back.

Now, I realize I might be a year or so early in making this call… The same way Warren Buffett was about a year early when he sold roughly $100 billion worth of Apple stock last year. Shortly afterward, Apple shares rose as much as 30%.

I realize the same may happen with me on my call to exit the S&P 500.

But I also realize that – even if all the clouds parted tomorrow and tariff agreements are reached, the Federal Reserve floods the world with liquidity, and the S&P 500 storms to new highs overnight – bitcoin will still outperform the S&P 500.

Even as I write, the S&P 500, Dow, and Nasdaq futures are surging higher as Treasury Secretary Scott Bessent hints at an impending China deal and the President walks back his threats of firing Fed Chair Jerome Powell.

And yet, bitcoin is surging even more…

Bitcoin Is the Faster Horse