Record inflation, which has not been seen for fifty years, puts Italians’ savings at risk, including mortgages, current accounts, rents and government bonds. And the thorniest chapter concerns Bitcoin and companions.
Actions
The stock market drifts on the war, “but SMEs are resisting”
The first six months of 2022 were much heavier than expectations. The overall balance sees the Ftse Mib index drop 23.3%. It did not go better for Wall Street, with the Nasdaq technology index leaving 30 percentage points on the ground, marking the first worst half year since 2002, and with the S&P 500 having its most severe performance since the 1970s. The prospects for drawer holders are few, given this gradient of uncertainty. This is remembered by JP Morgan, who in a note last week indicated that “it is better to wait a little longer before having a clear vision on strategic positioning”.
The opportunities, in the face of such widespread unknowns, must be calculated in detail. Antonio Amendola, manager of the PMItalia Esg fund of AcomeA Sgr, doesn’t mince words. “The current market moment makes the value of stock picking and the selection of individual company histories even more evident,” he warns. In the light of the moonlight linked to war and inflation, the economist of AcomeA points out, there are possibilities: “The orders of small and medium-sized enterprises are at record levels, so they are prepared to face further months of uncertainty from the point of view international”. The downside risks, however, remain high.
Government bonds
The leap in the yield of the BTPs, the danger of a boomerang in the bank
The rise in interest rates risks being a boomerang for those who have invested in bonds. From the beginning of the year to date, the ten-year BTP yield was 201.88 per cent. Soaring result of the return to normality by the ECB. But that could get worse. As Rocco Bove, head of the Fixed Income division of Kairos points out, “the central banks are painstakingly chasing events, with the inevitable consequences that a forced rise in rates generates on the markets”. It is difficult “to predict the new level of interest rate equilibrium”. Of course, he explains, “it will depend on the persistence of inflation; a slowdown in the global economy will also cool prices, at least in part ». As a result, volatility will remain high. And, as Goldman Sachs points out, the focus will be on Italy. “In the past episodes of distress, the increase in the long-term interest rate has been accompanied by a flattening of the Italian sovereign yield curve, with an increase in refinancing risk, and a sharp correction in fiscal policy has often been associated with a market trend reversal ”, explains Filippo Taddei, Goldman Sachs economist. The problem, points out Société Générale, is that Italian banks have many BTPs in their stomachs. An element that could make them less attractive than the EU teams.
Mortgages and brick
Euribor boom, close to 1%, the rental market is a puzzle
Those who decided to buy a house ten years ago, taking advantage of rates close to zero, have more advantages than those who decide to enter the market now. The normalization of the ECB will have direct consequences on mortgages, which are linked to Euribor rates. On the day of the Russian invasion of Ukraine, the one-month Euribor was at -0.54%, the three-month at -0.53%, the six-month at -0.48% and the one-year one at – 0.33%. By July 1st, the scenario had already changed. One month at -0.51%, three months at -0.18%, while the curve turned positive for the six-month Euribor, + 0.24%, and for the one-year, +0.96 %.
In the meantime, as noted by the Bank of Italy, the usurious threshold rates rose in the third quarter of the year. Specifically, the threshold rate for fixed rate mortgages rose to 6.68% from 6.48% while for variable rate mortgages it fell from 6.83% reported at the end of March to 6.78%. The threshold rate for consumer credit has risen to 15.91% while the threshold rate for the assignment of the fifth is indicated at 17.5%.
Rents are also in danger. With the increase in the price of energy components, next autumn could see adjustments for condominium expenses. According to Idealista’s calculations, «with inflation at 5.8% at the end of 2022, annual increases of 348 euros are expected.
Cryptocurrencies
Honeymoon over for Bitcoins, virtual currencies are now scary
The thorniest chapter concerns Bitcoin and companions. The largest cryptocurrency in the world is losing 58% since the beginning of the year (and this quarter) and about 70% from the record of $ 68,990 recorded in November. «Bitcoin continues to be under pressure, as well as other assets. The mix of high inflation, rising interest rates and recession weigh on cryptocurrencies, ”commented Seba Bank’s Yves Longchamp, speaking with CNBC. Bitcoin is heading towards its worst quarter in over a decade: the current -58% is the worst decline since the third quarter of 2011, when it was still in its infancy.
Many savers are being attracted to crypto-assets, but without having the correct financial information, the Bank of Italy has repeatedly stressed. From Binance to Coinbase, passing through Bitpanda, crypto trading platforms have accelerated on advertising, often in overly aggressive ways. In Italy, with the pandemic, the volumes traded rose by 148% according to Coinbase data for the end of 2021. And for the first six months of the current year, Binance points out, a double-digit increase is to be expected. . However, an often unexpected volatility could follow, Palazzo Koch reiterates. And that could destroy income and erode savings.