Current week markets commentary
In these last weeks, we have seen a lot of volatility in the market, in particular in the European Equity sector. This volatility comes from the Russian-Ukrainian war and we think that this situation will lass also in the next days or weeks.
As regards the price of European Equity we think that at this moment there are interesting opportunities, obviously, we need to consider that the war is still with us and at the same time we think that this situation will lass as I said, some weeks or months.
At this moment for an aggressive investor, we can say that there are a lot of interesting opportunities on European Equity, in particular in some sectors like food and beverage and pharmaceutical, for example, we have seen an important drawdown for Unilever and Nestlè, which are two of the biggest company in the world as regard food and beverage. So, in our portfolio, we are buying some of these stocks in a little percentage to take an advance in the case the war the East-Europe will solve with some new talks between Russia and Ukraine leader.
At the same time, there are also some topics related to the bond sector because we have seen that European Central Bank is going to raise rates and so we can expect that in next months we will see a drop in the price of secondary markets for all the investment-grade bond denominated in Euro currency. At the same time also in the United States, Federal Reserve is going to increase the rates and so we can expect that also United States dollar’s denomination price will be under pressure in the next week, so we can say in particular for the duration between 5-12 years we will see an important impact from the rise of the rates and at the same time for the longest duration this impact will be lower because as we know the long duration bond tends to be a safe haven and so investors can use this instrument to hedge the portfolio.
As regard energy independence, this war is going to change completely the energetic scenario in Europe, we think that this war it’s very important to push an energetic transition in particular towards renewable energy and so we are going to invest in a lot of company exposed to this sector, for example, the Deutschland company Siemens or ABB the Swiss company leader in electric energy transmission and at the same time utilities play an important role in the European Union to this change. For example, the Italian company Enel or the energy French company EDF will be an important player in the transition and we think that a lot of counties like Italy, Germany, France, and Switzerland are going to invest a lot of effort to be more independent about import traditional energy, oil, and gas in particular but also coal. So, we are going to see an important change and we think that this high price of energy will last at least some months, but at the same time we think that in the long term, like 3-4 years, this sector will be very different from now and we will see a completely changed scenario, so we can expect also prices will be overcontrolled and in term of impact on inflation we will see some change. At this moment inflation is very high but we think that it’s a transitionary situation and in the following weeks we will see freezing in terms of the inflation rate.
European sentiment on equity sector is for sure more negative than United States sentiment, so at this moment we are seeing a very different trend between the stocks of the European continent and the United States market, and we think that this situation with last at least some weeks or months, for sure European negative sentiment comes from tension in Russia and Ukraine and this situation will last until when the leaders find an agreement within this uncertain situation.
China is for sure an important player in this war scenario and we think that its role it’s very important in the determination of the end or progress of the war between Russia and Ukraine.
We think that the Chinese leader at this moment is very careful and maintain China’s ambiguity in term of talks with the European Union and the United States.