This section hosts the newsletters that we periodically send to our investors: they report our opinions on the economic scenario and the performance of the financial markets; they illustrate our vision and investment choices.
The key factors of tomorrow (which should be evaluated today)
A political and economic scenario is taking shape and is significantly different from that of recent years. The weight of various factors and diverse nature can be significant: recovery of the post-pandemic world economy exceeding the best expectations; job market reshaped by digital transformation; geopolitical tensions; commodity prices; new role for governments in the allocation of capital It is plausible that the expansion of monetary policy change direction, for example through a tapering of central bank purchases Market prices imply both the prompt full recovery from the pandemic. A further rise in prices will only occur in the presence of astonishing economic performance or the reopening of service business ff Approaching the end of the health emergency, trends are emerging which configure a scenario… Read more
Small spaces and many unknowns: being selective is a must
The Biden Plan in the United States and the Next Generation EU configure, in fact, the entry into a state capitalism of which there is no trace in recent economic history It is not certain that the expansionary policies pursued in the United States and Europe will generate higher inflation in the long run. Much will depend on the content of the plans and how they are implemented and financed. Market prices meanwhile discount the best of scenarios with room for growth limited to the sectors that have suffered most from the pandemic In the early months of 2021, the surge in US rates in the long part of the curve favored some sectors, banking and insurance in particular, a movement that now seems… Read more
The long wave of the new FED’s mandate
With the replacement of the inflation target (not 2% per annum but an average of 2% over the period), expectations of a rise in prices have grown First consequences: sale of long-term bonds, rise in yields, sales of equity with higher residual cashflow in their valuations (such as many Nasdaq companies) With the steepening of the curve, the use of bonds as a hedge instrument could return, putting an end to the long phase in which the two markets grew in parallel The progress of the vaccination plan also weighs on the investment choices. The sectors most penalized by the pandemic are once again interesting. The high valuations lay the foundations for sector consolidations ff The new course of the Federal Reserve… Read more
Speculating in a bubble? Here the pros and cons
Many people remember The Big Short, the film inspired by the big financial crisis of 2007-2008, in which the protagonist took increasing short positions having assessed that the subprime market was in a bubble and the mortgage backed securities (MBS) tranches, evaluated with triple A, were also at risk. Recent studies have shown that, even the short positions taken were not risk-free at that stage. Today, the Major indices (we are in the eleventh year of equity growth) are configuring a textbook situation: how take advantage of an extreme market situation? What are the related risks? The first alternative is to go short for as long as necessary until the trend reverses. This approach implies a relevant cost of carry, both for the duration… Read more
The (ephemeral) value of passive management
In 2020, as in the last decade, those who invested by reproducing the performance of the indices were rewarded even if they were exposed to high volatility The markets were once again fueled by liquidity generated in various forms by central banks which obscured the fundamentals of issuers and the economy For many this trend will continue because central banks have no alternative, but is it advisable to invest relying exclusively on this factor while the valuations of the financial markets are now double the historical average (S & P500) and the typical signs of an end of the cycle are multiplying out there? ff Better to passively go with the flow. The performance of investment made by professional managers over the… Read more