The no deal Brexit, the tariff war and the consequent slowdown of the global economy keep the stock exchanges and investors in suspense. Is it still worth investing in the stock market and where? This is the question that Matteo Ramenghi, Chief Investment Officer of UBS WM Italy, tries to answer, starting from the annual UBS Forum, held in Milan at the end of January.
We maintain our overweight position on global equities, while maintaining various counter-cyclical positions to contain any volatility (Japanese yen, put spread on the S&P 500). Every market correction, like the one at the end of last year, offers opportunities. In particular, I believe that today there is the possibility of positioning oneself on megatrends, ie on long-term environmental, demographic and technological changes. The growth of the world population with the consequent stress on natural resources, the growing aging that will put healthcare and pension systems to the test, the centrality of the metropolis and the ongoing technological revolution represent formidable challenges, but also great opportunities for investors.
Matteo Ramenghi's analysis arrives at this conclusion starting from the risks with which the market is confronted today: US tariffs, anxiety about Brexit and populism in Europe, which – he says – “are the result of growing dissatisfaction of the middle class in Western economies which, faced with the growing polarization of society, feel they have paid the bill for globalization and direct their voting preferences towards political forces that propose alternative, often anachronistic models: walls, tariffs, uncontrolled public spending, financial autarky”.
But all this is likely to lead to a great illusion. Immigration is being targeted by forces on both sides of the Atlantic: Trump threatens to build a wall on the border with Mexico, Italy closes its ports and many countries in Northern Europe refuse their allotted quota of migrants. It is unlikely that the advanced economies, especially Italy, will be able to shut down like a hedgehog, because the aging of the population will reduce the workforce. In addition to this, integration policies are lacking or insufficient.
As for Brexit, according to UBS estimates it could cost the United Kingdom 7-10% of GDP in a few years.
Let's come to Italy: it is not immune to populist tendencies, on the contrary, it could be defined as a political laboratory for the rest of Europe. But above all, Matteo Ramenghi points out, the peculiarity of Italy - characterized by an important public debt and private savings that quadruple it in value - means that creating tensions on the spread entails not only a repercussion for the economy, but also the risk of higher taxes on savings and real estate – thus obtaining the opposite result compared to the initial requests.
