The world's wealthy have multiple options to pick and choose where to put in their investment funds. HSBC's Georgios Leontaris gives his picks - and those that aren't. Image Credit: Supplied

Dubai: The force seems to be getting behind Bitcoin all over again, with the cryptocurrency trading at $66,833 levels currently (11am, May 20). And possibly looking good to make another break past $70,000.

All of which is quite good for those investors who remained steadfast on Bitcoin even when it went as low as $16,625 on January 1, 2023. (Plus, all that constant chatter about a ‘crypto winter’.)

Investors are piling back into the virtual asset, boosted by ETF (exchange-traded fund) activity. But none of that matters to Georgios Leontaris, Chief Investment Officer for Switzerland and EMEA at HSBC Global Private Banking and Wealth. He’s not going to advise his wealthy clients to take up positions in Bitcoin or any other crypto.

“We remain sidelined in crypto assets,” said Leontaris. “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.

“Volatility remains considerable for now, and investors need to consider risk-adjusted returns for their investments.

“Diversification is also often cited when contemplating crypto assets. However, their sensitivity to macro-variables such as inflation is not clear cut and has evolved over time. (They were) initially thought as an inflation hedge but subsequently trading in sympathy with growth stocks, for instance.”

Stock - US stock market / NASDAQ / Stock market / Markets
"Although we expect further progress to the 2% inflation target to be slower from here, this should not prevent central banks from cutting rates as soon as June..." says Leontaris Image Credit: Supplied

Where to park wealth

Leontaris is on point about this. If allowing US-based ETFs to carry crypto was the biggest break Bitcoin could have got, these assets still have not been able to make further inroads on the regulatory front.

So, if not Bitcoin, what should wealthy investors take on more by way of growth assets?

“We have recently added further to our overweight in US equities, driven by macro-economic resilience and expectations for further earnings growth,” says the HSBC official.

“In terms of sectors, we continue to like technology (whose multiples have actually come down from last year’s peak). However, we also broaden our allocation to other sectors such as consumer discretionary, industrials and healthcare.”

Our tactical asset allocation has an overweight in Global Equities, led by positions in US and Japan and complemented with exposure in select EM countries such as India and Indonesia

- Georgios Leontaris of HSBC Global Private Banking and Wealth

Can US markets sustain the rally?

In the US, there is the Presidential election coming later in the year. Even the slightest shifts can show up big on market swings and investor moods. There is also the constant ifs and buts around a US Federal Reserve interest rate cut.

“Economic growth in the US continues to show resilience,” said Leontaris. “Even though the near term outlook for inflation remains bumpy, we expect to see further progress in disinflation expecting core PCE (the Fed’s preferred inflation gauge) to average 2.6 per cent this year.

“This should allow the Federal Reserve to start cutting interest rates, which is expected this summer, with lower rates supporting current multiples.

“Meanwhile, the latest US earnings season is on track to report 5 per cent growth in earnings (compared to expectations of only 2 per cent growth at the start of the season).

“Looking forward, expectations are for close to 10 per cent earnings growth with a larger share of sectors recording positive numbers.”

‘Neutral’ on gold

Gold is another asset having a good time of it, now breaching $2,400 an ounce levels quite consistently. But Leontaris prefers to be neutral on this safe haven asset.

“Geopolitical risks, trade and financial market uncertainty have contributed to the rally,” he added. “However, physical demand for gold may start to wane as supply continues to rise.

“Our expectation for a stronger USD could also limit a further sustained appreciation in gold.

“The expectation of forthcoming interest rate cuts, the uncertainty on 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, driven by the desire to maximize portfolio diversification.”