Bitcoin’s recent resurgence, now trading at around $69,000 and potentially surpassing $70,000, has rekindled investor interest in the volatile cryptocurrency market. This marks a significant recovery from its dramatic low of $16,625 on January 1, 2023, during a period commonly referred to as the “crypto winter.” Despite the renewed confidence among crypto enthusiasts and increased activity in exchange-traded funds (ETFs), not everyone is convinced of Bitcoin’s stability or suitability as an investment.
Georgios Leontaris, Chief Investment Officer for Switzerland and EMEA at HSBC Global Private Banking and Wealth, remains steadfast in his cautious stance towards cryptocurrencies. Leontaris has made it clear that he will not advise his high-net-worth clients to invest in Bitcoin or any other crypto assets.
“We remain sidelined in crypto assets,” Leontaris stated. “Their unregulated nature continues to provide uncertainties and legal overhangs over the medium term, whereas investors continue to grapple with the specific role of Bitcoin in portfolios.”
Leontaris points out that the considerable volatility of cryptocurrencies requires investors to meticulously assess risk-adjusted returns. He also challenges the commonly cited notion of diversification through crypto assets, emphasizing their inconsistent sensitivity to macroeconomic variables such as inflation.
Instead of venturing into the unpredictable crypto market, Leontaris advises focusing on growth assets. “We have recently added further to our overweight in US equities, driven by macroeconomic resilience and expectations for further earnings growth,” he said. He highlighted a particular interest in technology sectors, whose valuations have moderated from last year’s peaks. Additionally, he recommends broadening investments to sectors like consumer discretionary, industrials, and healthcare.
The US market, with its impending presidential election, presents its own set of challenges and opportunities. Market dynamics can be significantly influenced by political developments and decisions by the US Federal Reserve regarding interest rates. Leontaris remains optimistic about the US economy’s resilience, despite a complex inflation outlook.
“Economic growth in the US continues to show resilience,” Leontaris explained. “Even though the near-term outlook for inflation remains bumpy, we expect to see further progress in disinflation, with core PCE [the Fed’s preferred inflation gauge] averaging 2.6 percent this year. This should allow the Federal Reserve to start cutting interest rates, which is expected this summer, with lower rates supporting current multiples.”
The latest US earnings season has also shown promising results, with a 5 percent growth in earnings, surpassing initial expectations of 2 percent growth.
Gold, another traditionally safe haven, has been performing well, consistently trading above $2,400 an ounce. However, Leontaris maintains a neutral position on gold, citing potential limits to its sustained appreciation.
“Geopolitical risks, trade, and financial market uncertainty have contributed to the rally,” he noted. “However, physical demand for gold may start to wane as supply continues to rise. Our expectation for a stronger USD could also limit further sustained appreciation in gold. The expectation of forthcoming interest rate cuts, uncertainty around US elections, and ongoing geopolitical risks should lend some support to gold. However, at current levels, the rally seems overstretched. We therefore keep a neutral position in gold.”
Leontaris’s cautious approach reflects a broader sentiment among traditional financial institutions, highlighting the continued debate over the place of cryptocurrencies in diversified investment portfolios. As Bitcoin and other digital assets continue to fluctuate, the divide between crypto proponents and traditionalists like Leontaris remains pronounced.