Focus Risparmio | July 2021

Many people wonder what titles the market and, in particular, banks and financial networks will bet on. Before making any speculation, it is necessary to focus on some certainties.

First: any form of investment should be increasingly in line with ESG criteria, on a formal as well as substantial level (i.e., articles 8 and 9 of the SFDR).

Article 9 SFRD funds are only 125 out of 5.419. Article 8 SFRD funds reach 1.080. Today, those who have believed in sustainability dominate the charts: 25% of the overall net inflow promoted by the industry is in the hands of funds with a strong ESG focus.

Second: since the beginning of 2021, in a post-pandemic context characterized by the launch of large-scale vaccinal campaigns, economies have entered a recovery cycle with different recovery speeds.

Europe and Japan expect a negative output gap in 2022; in the USA, economy is starting to overheat; China is trying to stabilize the internal debt ratio with a strong upward pressure on yuan, likely to generate commercial tensions with the rest of the world.

Third: in 2021, the financial stimulus measures and the savings accumulated during the lockdown could generate a new demand from Italian families and businesses.

This is inevitably going to generate inflationary pressures. While temporary, they will be linked to shortages of supply in the industry of semiconductors, transports, building materials and metals employed in the transformation of energy (copper, cobalt).

The pandemic has accelerated the main trends (already underway) in the fields of digitalization, deglobalization and decarbonization: the former generates a positive impact on the offer, while the latter two entail a negative impact which may generate long-lasting effects.

Furthermore, inflation and rate hike are to be taken into consideration.

In Italy, where investors tend to be risk averse, many predict an increase in investments in the stock market.

According to AMCs, thematic equity funds have great potential. However, thematic equity funds are far from being a novelty, in fact they have been the key to some AMCs’ success.

New opportunities may arise in bond markets. However, the very low returns make it necessary to look for returns in emerging countries or in more difficult business sectors.

The third wheel between bond investments and equity investments are investments in real economy, ISAs and ELTIFs.

However, considering that only 1 Italian out of 4 invests his/her savings, it would be more appropriate to consider the goals, time horizon and risk appetite of clients, before discussing asset classes.

A good financial advisor should be able to identify the needs his/her clients. In this regard, it is necessary to keep in mind that: 1) Italian people cannot wait (average time horizon: 2 years vs. 4 EU); 2) risk appetite is linked to the level of trust in financial markets, a very low figure in Italy.

In conclusion, we are in front of a market driven by offer as well as by those who can best read the current trends: sustainability, decarbonization, deglobalization.

Creating a convincing and engaging storytelling hinging on leading themes will be essential: first and foremost, health and infrastructures for recovery.

Nicola Ronchetti