Bitcoin Is Stuck While Stocks Keep Ripping | Fidelity’s Jurrien Timmer

Jurrien Timmer of Fidelity joined the episode as the S&P 500 broke 7,800 for the first time while Bitcoin sat near 63,000, and that divergence drove the core of the discussion. Timmer attributes the equity rally to the AI earnings story, with S&P 500 earnings growing roughly 35 percent year over year and the second derivative of that growth still accelerating. The dollar earnings estimate for the index is up about 100 dollars over the past year, and the five-year earnings CAGR is running around 15 percent, which he describes as about as good as it historically gets. Forward PE sits near 20 on the cap-weighted index and around 18 on the equal-weighted version, and 75 percent of S&P 500 stocks are above their 200-day moving average, compared to only 20 percent during the final 1999 to 2000 rally, suggesting the current advance is broader and more fundamentally grounded.

Timmer flags the Magnificent Seven as a meaningful concentration risk. The group used to return roughly 85 percent of earnings to shareholders but now returns only about 35 percent because of heavy capital expenditure, and CAPEX carries uncertain outcomes unlike share buybacks. Approximately 500 billion dollars is expected to be borrowed this year for hyperscaler data center expansion with another 500 billion the following year. He sees the market beginning to differentiate between companies with clear CAPEX return visibility and those spending without demonstrable gains, citing Microsoft rising and Meta falling after earnings as a live example. He also notes that cheaper Chinese open-weight models may be disrupting expensive closed frontier LLMs, and views investors demanding tough ROI answers as a healthy development.

On rates, Timmer says the Fed model is back, meaning Treasuries are now priced competitively against equities. He places the yellow zone for the 10-year Treasury at around 4.7 percent and says a move to 5 percent would pressure valuations, though a lower PE does not necessarily mean lower prices when earnings are growing 35 percent. He argues the Fed's last few rate cuts in 2024 were not justified by the Taylor rule, and the bond market never believed the rationale since Treasury yields rose after the cuts. If the Fed skips both July and September without cutting, Timmer predicts the back end of the yield curve will steepen and the bond market will effectively tighten financial conditions on its own.

The US posted its largest July budget deficit in history at 432 billion dollars, and national debt stands near 40 trillion dollars, up 15 to 16 trillion since COVID. Timmer breaks that down as roughly 5 trillion from COVID-era spending and another 5 trillion or more from the big beautiful bill. The five-year CAGR of nominal GDP is currently around 6 to 7 percent while the 10-year Treasury yield is about 4.65 percent, meaning the growth rate exceeds the funding rate for now. He says if bond vigilantes push yields to 5 or even 6 percent that sustainability breaks down. He also describes a policy approach of deregulating banks and using a steep yield curve with term premium to have banks absorb Treasury supply as proxies for the Fed.

On Bitcoin, Timmer says the asset reached 126,000, representing a 100 percent CAGR over 125 weeks from the preceding low, and that level fell within the zone where a four-year cycle bull market would be expected to end in both time and price, though he had anticipated 150,000 as more likely. Bitcoin is now near 63,000, close to the power law trend line support he has cited since last October at approximately 65,000. He attributes the stall to fast money that entered via ETFs rotating out of Bitcoin into gold and then into AI and semiconductors. Global liquidity growth is starting to pick up again, which he expects to benefit gold first and then Bitcoin. He notes that when the Bitcoin-to-gold ratio Z-score reaches minus 100 percent on a detrended basis Bitcoin has historically put in a low, and that condition was met recently. Open interest in Bitcoin futures is rising while implied volatility sits at multi-year lows, which Timmer interprets as signaling a large move is approaching. He places the risk-reward for Bitcoin as balanced near the 50,000 to 60,000 range.

The average cost to mine one Bitcoin currently stands at approximately 74,000 dollars, meaning miners are losing money at present prices, and publicly traded miners are increasingly converting operations into AI data centers where margins are more attractive, contributing to a decline in Bitcoin's overall hash rate. Strategy sold roughly 12,000 Bitcoin across several transactions raising around 108 to 109 million dollars to fund a repurchase of its STRC instrument, without disclosing the sales in its announcement, yet Bitcoin's price rose after the selling, contradicting predictions that the sales would suppress the market. Goldman Sachs is acquiring Bitcoin and Ethereum income ETFs through a deal worth up to 2.25 billion dollars, with roughly 1 billion in a Bitcoin income fund using a covered call strategy, a move Timmer's host suggests reflects Goldman's preference to acquire rather than build after its own Bitcoin income ETF filing went unlaunched.