The Column – Market Insights
Episode number two of our story of thefirst 25 years of this century which close in a few days. On Saturday 5 December we offered you the considerations that emerged from the geoeconomics and asset allocation side, while today we will share with you the part on the financial markets and the part on the evolution of the savings management sector in Italy.
Here are the main aspects that emerged from our research side financial markets:
➢ First of all there is a absolute winner of these 25 years at the performance level which is gold. 1400% and more returns beats any other asset class by far given that second is the Nasdaq, and therefore American technology, with a +600% and followed by the emerging stock markets (+500%). The riskiest bond investments did very well (high yield +360%), raw materials were mediocre (+270% heavily penalized by oil), last as logical the monetary investment represented here by the BOT index (+50%).If gold’s primacy surprises you, consider that gold began this quarter of a century near important lows (at the end of 1999 it was worth 300 dollars an ounce and was coming off a 20-year decline) and closed them at historic highs! With an important consolidation phase in the middle but never a real bear market. On the other hand, the Nasdaq has had two important declines (between March 2000 and October 2002 it lost 80% and during the great financial crisis almost 50%).
➢ Among the dozens and dozens of bags that exist around the world, it should not surprise us that i better results have been achieved by the stock markets of some emerging countries with Romania, Mongolia and Indonesia on the podium, followed by many Eastern European stock exchanges which benefited greatly from the opening that took place at a geopolitical level (good times). Bloomberg reports only one stock exchange in the world that closes 25 years with a negative trend (Greece with the Athex index down 30%) and it is not surprising given what happened in the post-GFC Greek country.
➢ Bro currencies (pure ofspot exchange rate) the Swiss Franc could only winthe symbol of security and solidity which appreciates by 70% compared to the Euro. Followed by the Czech Koruna (a surprising +45%) and the Singapore Dollar (same “category” for “Asian Switzerland”) at +20%. On the negative side, we point out many currencies from emerging countries that have had out-of-control inflation and/or major political problems (Argentine peso which has lost 99% of its valueTurkish Lira 98%, Russian Ruble 75%), although to evaluate the overall result of a bond investment in these currencies the entire carry component obtained should be considered.
➢ It is also interesting to observe how the thematic investmentsat their dawn in 2000 and today more than ever part of our world. By focusing on the equity ones we are able to go back about fifteen years and we can appreciate the fact that there are not many themes or megatrends that have managed to do better than the stock market (Msci World): only the infotech / digital funds (about 150% better than the market as you can see in the Bloomberg graph) and the Biotech / Advanced Pharma (50% more). The others perform worse and in some cases in a very clear way: seeing the theme of population aging or that of healthy leaving/food so far behind is surprising. But if we think about what themes the market has looked at in the last 5-6 years, perhaps we are actually faced with one big buying opportunity for these two themes. Not to mention the product that invests in forests and timber.
➢ Fourth consideration that we propose to our readers concerns the “bubbles” recorded in these 25 years (actually in the past 50 since the Bank of America graph goes further back in time). What can we learn from history? Which all at some point undergo a correction, often very profound. The one underway today (I am among those who consider it as such) it is perhaps the largest ever recorded, in terms of size of the performance and speed / steepness of the movement, especially from 2022 onwards with the Infotech / AI / datacenters theme and the protagonists, here defined as the “Disruptors” reigning supreme. Since we previously talked about the stellar performance of gold, I would just like to remind you that the “bubbles” are calculated in this graph from a significant minimum to the maximum reached and then the immediate decline; in this sense the performance of gold from 2016 to today is “only” 300%, compared to 1000% of MAG7 and similar.
➢ Let’s close this overview of the asset classes by remembering how there were different seasons that favored first one and then the other. To give some concrete examples we can recall the golden decade of raw materials (2002-2012) with oil, copper and other base metals rising strongly and driving the performances of emerging markets equity and local currency debt of their governments. Or even the ten years of excellent performance for government bondseurozone countries that after the Euro crisis, from 2012 to 2021 they experienced an exceptionally positive period with a strong decline in peripheral spreads and excellent returns for anyone who invested in BTPs, Spanish Bonos or Greek securities. Or even the golden age of American stocks which in the last 15 years has won from all points of view with the dominance of its companies in many key sectors, the production of profits much better than other geographical areas, the weight of its megacaps which comes to dominate the world indices and the development of passive investing (ETFs and index funds) which exacerbates the phenomenon even more. Or finally the ups and downs of the American dollar which over the 25 years has fluctuated between 0.85 and 1.60 against the single currency.
And what about the managed savings side in our country? The last of the topics we are addressing today and with which we conclude our overview of 25 years of geoeconomics, finance and markets.
➢ The savings managed in Italy it has grown a lotalthough as we well know less than other countries, especially English-speaking ones, going from just under 1tr (sum of funds, management and social security funds) in 2000 to the current 2.6tr.
➢ The concentration of the sector remains quite high with the top 5 market operators controlling 60% of the total masses.
➢ The foreign presence, especially on the funds and SICAV side, has increased enormously going from 5% of the market in 2000 to 30% today. It’s a shame because on the asset management side, many beautiful and promising companies that were protagonists in the 2000s have disappeared, often acquired by larger companies or foreign groups.
And here, in the last episode of our monthly column for 2025, I remember with pleasure the beautiful growth of Sella group for which I have been working for a dozen years and which has become one of the important protagonists in Italy both in terms of management banks and asset management, as well as naturally in commercial banking activities.
