Gold: A Stable Investment Amidst Economic Uncertainty
In this uncertain macro environment, Hugh Hendry, Founder of Eclectica Macro, emphasizes the importance of having exposure to real assets. His top pick among real assets is gold, which he suggests allocating 5% of one’s portfolio. Despite gold consistently hitting the $2,000 price barrier over the past 12 years, there hasn’t been enough economic stimulus or data to support a sustained increase in gold prices. However, Hendry believes that in the months and years to come, gold will breach this resistance level and rise above $2,000 per ounce. When this happens, he plans to increase his gold allocation.
Bitcoin: The New Kid on the Block with High Growth Potential
Hendry is even more bullish on Bitcoin, allocating 20% of his portfolio to the cryptocurrency. He sees Bitcoin as the new kid on the block that has shown a proof of concept. Despite a recent correction from its record high, Bitcoin has significant upside potential. Hendry highlights the difference in market capitalization between Bitcoin and gold, with Bitcoin’s total market cap currently at $500 billion compared to gold’s $12.6 trillion. He believes that Bitcoin has a higher chance of tripling in price than gold due to its smaller market size. The approval of spot Bitcoin ETFs, including BlackRock’s application, could be a catalyst for Bitcoin’s growth.
The Role of Wall Street and Investor Confidence
Hendry notes the role of Wall Street in driving Bitcoin’s growth. If Bitcoin’s market cap can increase from half a trillion to several trillion dollars, it presents a significant opportunity for companies like BlackRock to launch Bitcoin ETFs and profit from the cryptocurrency’s ascent. Hendry expresses confidence in having financial institutions like BlackRock and Fidelity supporting Bitcoin. He believes that as an investor, having the backing of Wall Street is crucial and increases the likelihood of Bitcoin’s success.
Diversification and Allocation Strategy
Hendry is cautious about overexposing his portfolio to equities and recommends not allocating more than 20-25% to stocks. He sees the combination of Bitcoin and gold as hedges against risks such as geopolitical tensions and central bank digital currencies (CBDCs). As the trend of de-dollarization gains momentum, Hendry is skeptical and believes it is detached from economic logic and reason.
In uncertain times, Hugh Hendry suggests having exposure to real assets. While gold remains a stable investment, Hendry’s bullishness on Bitcoin stems from its growth potential and the backing of institutions like BlackRock. As cryptocurrencies and traditional assets continue to evolve, diversification and allocation strategies play a crucial role in managing risks and pursuing profitable investments.