PRI

Flash view on hot market topics

Mauro Ratto, Co-Chief Investment Officer Plenisfer Investments SGR

 

Interest rates and inflation no longer drive market sentiment: today, financial flows are increasingly influenced by the impact of policy decisions in Washington and by the ‘whatever it takes’ scenario that has emerged in Europe where the debate on the need for strategic autonomy in defence, together with the urgent need to achieve energy independence, is ongoing. 

In this evolving scenario, we confirm our macroeconomic thesis: the demise of globalisation is leading to an environment of higher production costs, high interest rates and significant debt burdens. 

We are approaching the end of a prolonged positive macroeconomic cycle, sustained not by organic growth, but by debt-fuelled fiscal policies, which do not bode well for the future. A high level of debt, especially in developed economies and China, is typically associated with low GDP growth in the long term and, consequently, low equity returns in the medium to long term.

Nevertheless, through a flexible, benchmark-neutral approach, investment opportunities can still be found in global markets. 

Looking at the US market, we believe that single opportunities remain. However, the technology sector is characterised by excessive valuations and concentration risk, while maintaining solid fundamentals. The uncertainty arising from the Trump administration's trade policies has particularly penalised US markets in the fist half of March, generating a risk-off effect on global markets. 

In Europe, we continue to look closely at energy transition and infrastructure investments, also supported by announcements of fiscal expansion in the region. The possibility of a peace agreement between Ukraine and Russia also introduces multiple scenarios regarding Russia's energy supply capabilities, which could put downward pressure on energy prices. The banking sector continues to offer opportunities, particularly in Greece where the economy is showing encouraging signs.

International investors remain cautious on China, where valuations are at record lows. In the technology sector, fundamentals remain solid, and the steady generation of free cash flow and earnings growth over the years show significant compression in multiples. Selected investment opportunities can therefore be found here.

On the bond side, the steepening of the yield curve reflects the immediate reaction of bond vigilantes to the coming rise in Europe's debt-to-GDP ratio. Against this backdrop, we believe it is preferable to maintain a relatively short duration.

Finally, gold continues to fulfil its function of stabilising and protecting the portfolio as it continues on its upward trajectory.

 

 

 

 

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