More bad news for Family and business. In October, in fact, at new records Interest rates on mortgages for families and loans for businesses in ItalyDespite ECB holding on to hike in reference rates: average rate sIn fact, new operations for the purchase of houses have reached 4.37%, the highest since February 2009, a in front of 4.21% in September, he brings it back L’ABI In your monthly report. According to the Association of Italian Banks, the average rate on new trade financing operations was 5,45%, The highest since October 2008, while in September it was 5.35%. The average rate on total loans was 4.70%, compared to 4.61% in September.
Mortgage, rate race does not stop
The bulletin states that indirect collectionThat is, investment in securities held in banks represents an increase of about Rs 229 billion between September 2022 and September 2023 (141.5 billion for households, 30.0 billion for companies and the rest for other sectors, financial companies, insurance companies, public administration). In October, medium and long-term funding through bonds increased compared to a year earlier (+15.8%), remaining fairly stable compared to September 2023 (+16.3%). Deposits alone in various forms declined by 4.6% in October 2023 compared to October 2022 (-3.5% in September 2023). Given the strong growth in indirect funding, total direct funding (deposits from resident customers and bonds) fell by 2.5% on an annual basis in October 2023 (-1.5% in September 2023)
Bank credit continues to contract in Italy, In view of the tightening of monetary policy implemented by the ECB in recent months and the slowdown in the economy, Loans to businesses and households in October were down 3.6% from a year earlier, after registering a decline of minus 3.8% year on year in September 2023. Separate figures relate to September: loans to businesses decreased by 6.7% and loans to households decreased by 0.9%, the association reports. We read that the decline in credit volume is consistent with a recession. Economic growth which reduces the demand for credit.
What is the impact on different asset classes?
“The market will have to deal with higher rates for some time yet. As a result, investors are presented with different allocation options compared to limited equity optionsOr those who have been dominant in recent times. Indeed, stock markets will continue to experience greater volatility due to the new higher rate environment. This creates new opportunities and highlights the importance of building your portfolio according to strategic strategies asset allocation”. This scenario is revealed by analysis of michael folk, Joe, Group CIO and Co-CEO Asset Management of UBP, explains: “Based on our macroeconomic outlook for 2024, We believe bonds offer attractive returns, as the two-year bear market should finally end: rates have peaked and it is likely the Federal Reserve will begin cutting them in the second half of next year.
inside the universe deeply concerned – Lok believes – “We prefer investment grade bonds with intermediate duration (3-5 years) or short-term high yield bonds (1-3 years). We are not investing in long-term bonds, Because the solid macroeconomic environment has limited the decline in 10-year yields, while the united states is failing Long-term concerns will remain for investors.
Despite high volatility, we maintain a neutral allocation towards equities, one of the few asset classes capable of delivering unlimited returns. After two years of limited growth, we believe double-digit earnings will be achieved in 2024. Due to a strong macroeconomic environment and persistent inflation, revenue growth of US companies will accelerate. Since global stocks are currently trading below their historical valuation averages, any additional decline would provide an opportunity for investors to increase their risk exposure.
In view of greater volatility – He adds – Investors should favor the use of equity-linked structured products that are able to achieve similar returns even with lower volatility. We maintain a neutral exposure to hedge funds and gold, as these asset classes have proven to be a valuable source of diversification within portfolios in the past, particularly at times when both bond and equity markets were declining. As far as equities are concerned, we maintain a neutral position, supported by the strength of the US economy and the peak in interest rates, which benefit from reduction. Global inflationary pressure.
However, We do not expect stock valuation There will be an improvement from its current level as alternatives offering similar returns but with lower volatility have already emerged.
For the stock market, we expect 2024 Total returns are expected to be 12%, of which 10% will come from corporate earnings growth and 2% from dividends/share buybacks. We remain overweight on US equities and have increased our exposure to Japan (from underweight to overweight) as economic and governance reforms are expected to accelerate earnings growth,” Lok adds.
Central banks are slow, what will they do?
“As far as Central bank, Both the Fed and the ECB are expected to move forward with a to break, While the risk of further advancement is limited. Therefore, we maintain a neutral stance on duration of exposure across all currencies, while waiting for further normalization of the yield curve. We continue to favor high quality bonds as market technicals remain solid, with high yields, moderate supply and spreads that should remain range bound. -bound. The 3-5 year part of the curve looks most interesting to lock in yields and benefit from a strong roll-down.”
“Credit spreadsOr they are only in the mid-range and as the refinance date approaches, the credit metrics of high-yield companies are deteriorating. It is too early to add risk and we prefer to remain selective in the high-yield segment while focusing on shorter-term issues.
US dollar exchange rates will remain well supported through the end of the year, thanks to high levels of front-end carry and continued positive momentum in economic data. The euro/dollar exchange rate should be Settle at lower levels, in line with the trend of the two-year interest rate differential; possible move to 1.02“, finish folk.