After the September market blow, what to expect in October? What are the factors to consider? Some insights into Equita’s monthly outlook
September was the worst month on the markets since the start of the pandemic. The losses recorded yesterday by Wall Street were the strongest, in September, from those collected in the month in which the alarm bell of the Covid-19 pandemic rang out all over the world, or from the month of March 2020. What to expect now from the month of October that has just begun? Equita like every month he published his “Monthly report”In which he highlights the performance of the month just archived and looks at the month of October indicating what are the potential factors supporting the equity markets.
The month just passed …
“A September equity markets were negative (Global Equities -4%) due to concerns about new regulatory restrictions in China, fears of contagion from the possible default of the Chinese real estate giant Evergrande (with 300 billion dollars of liabilities and about 2 trillion yuan of assets equal to 2% of Chinese GDP) and the tapering of the Fed ”, he remarks Luigi De Bellis, co-manager of the Equita Sim research office, which points out that US interest rates, after falling to around 1.1% in mid-July, have steadily risen to 1.52% (+21 basis points in the last month). In this context, according to the expert, It was mainly the Value and `reflation trade` and` re-opening` stocks that benefited (Such as energy, financial), while most penalized titles Growth (technological) and defensive. “In our view the d`interesse rates in both the United States and in Europe, are reporting one` stronger reflazionistico` scenario, “he adds.
Because the factors supporting the equity markets remain diverse and solid
The increase in the slope of the interest rate curve may lead to phases of market volatility in the adjustment phase; “However, we believe that the factors supporting equity markets remain diverse and solid: i Covid-19 cases are stabilizing and we see a continuing easing of fears related to the Delta variant; Furthermore, the high percentage of people vaccinated reduces the risks associated with more new waves of the virus, “explains Luigi De Bellis in the” Monthly report “. Equita expects an economic growth that will remain solid also in 2022 (US real GDP expected + 4.2% and + 4.5% in the EU) and strongly negative real interest ratesi: central banks have no real alternative to pushing nominal growth in order to make the debt created during the pandemic phase sustainable.
Furthermore, the expert expects a fiscal policy that will remain expansive (with the launch of the infrastructure plan in the US and the implementation of the Recovery Fund in the EU). Dwelling on Piazza Affari, De Bellis states that Italy is once again investable and its risk profile has drastically improved thanks to Draghi. As a result, “in the recommended portfolio we remain overweight relative to the benchmark (97.5% versus neutral weight of 95%), but we have slightly reduced the invested by 120 basis points to have flexibility in the event of increased market volatility you create opportunities.