The war in Ukraine is less scary than a year ago, at least for the audience in Cernobbio. Now are the possible financial crises to intimidate. Suffice it to say that the outcome of the usual televoting of the first session of the works of the The European House – Ambrosetti forum sees only 10.9% of the participants as “very” concerned by the conflict. A year ago the share was 19%. And although the case of Silicon Valley Bank and the rescue of Credit Suisse are considered by 47.9% of those present as “isolated cases”, 35.4% think they are “precursors of a systemic crisis of financial institutions”. In last place are the dynamics of climate change which concern only 2.3% of the participants.
«The period is extremely complicated, as if it were a Swiss watch». The comment from a long-time international financier encapsulates the mood around the markets well. Who, cautiously, move between easy illusions and bitter certainties. One of them is the rate hike by the European Central Bank (ECB) and the Federal Reserve. “The latest inflation data are positive, but it’s still too high,” warns one of the participants in the Villa d’Este Economics and Finance Workshop. “Prices are sticky, we are seeing a repricing,” he underlines. And he relaunches: «Inflation is unlikely to go down as Quantitative Easing is difficult to reverse». It will take time and we will have to push on Quantitative tightening, the reduction of the central bank portfolio, which the ECB has just started.
The problem, many point out, is that there are too many unresolved issues. The impact of the rate hike affects the residential and commercial real estate sector. Raise business costs. And it reduces the profitability of lenders. It is no coincidence that 20.3% believe that the consequences of the rise in the cost of money are one of the reasons for concern for their business. And 23.3%, moreover, think that there may be repercussions from possible systemic effects of the banks’ problems. A scenario in which no one is safe, given that, as the economist Nouriel Roubini remarked during his work in Cernobbio, it is a multifaceted crisis. Which passes from climate risk to banking risk, passing through the non-banking financial sector, as in the case of digital banks. A segment in which regulators can do little, as extreme decentralization has produced pockets in which to look is almost impossible.
Instability is high, as are the unknowns. One of the points on which more than one investor has asked for answers is China’s role on a global scale. «Now that the reopenings have been decided, should we expect an increase in energy demand from Beijing? And if so, then should we expect a new increase in prices?” many ask. As of now there is no definitive solution to this. If not to go step by step with constant monitoring of individual economic factors. Even on social media, given the snowball effect that distrust of US bank deposits can trigger, explains most of those present. The examples of Credit Suisse and Deutsche Bank burn, considered on average not justified by the balance sheets.
In any case, from an entrepreneurial point of view, the evidence from the Cernobbio audience is that it is necessary to proceed with prudence. “I’m not saying this is the calm before the storm, no. But it is a situation in which extreme attention must be paid, especially with savings», points out an entrepreneur present at the forum on Lake Como. With reference to business forecasts, the survey conducted among the participants was straightforward. “68% believe their business is performing better than their competitors,” the vote reads. In terms of turnover, “44.3% expect growth of less than 10% for their company, while 29.3% estimate growth of more than 10%”. As far as employment is concerned, “46.5% expect no changes, while 31.6% envisage a growth in the workforce of less than 10%” . Another positive note is the propensity to invest. In 2023, 48.2% of the audience intend to invest in Italy, followed by other European countries (18.1%) and North America (14.5%). For now, because as multiple investors present in the lakeside town point out, the situation appears to be calm, but could change suddenly for the worse.