Risk appetite is high and the bears are in retreat amid a dizzying market rally

Bitcoin reaching record highs. Memecoins rising and falling. Roaring Kitty pumping Gamestop.

You would be forgiven if you thought I was referring to the fever dream that was 2021 — but no, this was all just last week.

The market is reminiscent of those pandemic days when traders, flush with cash and time on their hands, sent stocks and crypto to the moon.

Perhaps bitcoin has finally landed there, having surpassed $100,000 for the first time last Wednesday, topping $103,000 before paring gains back below six figures. Some experts see it going even further, and even replacing gold as the premier store of value asset globally. Bitcoin is not alone, either. Altcoins like solana, XRP, and, of course, dogecoin have all soared in recent weeks.

It’s quite a comeback, considering the sell-off that followed those 2021 highs resulted in life savings evaporating, crypto exchanges collapsing (FTX founder Sam Bankman-Fried remains in prison), and fears of stringent regulation. At the time, it all seemed pretty fatal.

Yet here we are, once again seeing records break and rallies repeat.

As Dan DeFrancesco highlighted in this newsletter, bitcoin’s latest surge was fueled in part by Donald Trump’s nomination of crypto advocate Paul Atkins to run the SEC — and the celebrations continued when Trump announced David Sacks would be his AI and crypto czar.

Meanwhile, pandemic-era hero Keith Gill, aka Roaring Kitty, resurfaced last week, sending GameStop shares jumping after he posted a picture of a Time magazine cover on X. The post had no accompanying text, but retail traders rejoiced anyway. GME shares popped as much as 12% after the post before dipping back down on Friday.

And finally, there’s the broader stock market. The benchmark S&P 500 is up almost 28% this year, matching 2021’s gain and heading for its second straight year of returns of over 25%.

While the painful bear market of 2022 may be a warning for investors as they head into the new year, there are important differences, most notably interest rates. While the bear market of 2022 was spurred by rising rates, the Fed looks on track to cut rates again this month, which market experts see boosting stocks further into 2025.

The dizzying, AI-fueled rally and outlook for lower rates have sent many of the biggest bears into hibernation. The mood heading into next year is decidedly bullish, and few bears remain among the big banks.