10 February 2023#WeeklyWatch
Markets on a rollercoaster but in the long run who wins the challenge between btp and equities?
Piazza Affari better than government bonds in the last decade: export-oriented stocks win among the stars, while Banca Generali and Unipol are among the financials.
Markets on a rollercoaster ride with January trying to make people forget the disasters of 2022. Looking back at the rally in the first few weeks of this 2023 European stock markets recorded performances not seen since 2020 with purchases on both equities and bonds. Indeed, Piazza Affari has returned to prominence with a leap in one month of around 11% and the 10-year Btp around 8%. It is precisely the return of attention to the world of fixed income that represents the most interesting news of these first few sessions of the year, with global managers who had not looked at these securities in such an exemplary manner for as long as 14 years.
The 'derby' between Italian bonds and equities
A completely different scenario from the one we were going through only a month ago. The year 2022 will go down in financial history as the worst year ever with double-digit declines in both bonds and equities. Between the scepticism of savers over last year's sharp correction and the easy optimism rediscovered in recent weeks by the rapid narrowing of spreads, the most pressing question savers are asking themselves is whether or not to dive back into the markets and whether to dive into bond yields or follow the ups and downs of stock markets. In the absence of a magic crystal ball capable of interpreting future prospects, it is history that provides an interesting comparison of the derby between Italian bonds and equities.
Looking back over the last 10 years, at the performance of the Italian government bond par excellence, the 10-year Btp, and the indices of Piazza Affari, an interesting comparison emerges. On the one hand, our government bond has in fact gained 44%, with a volatility that is also quite significant considering the different historical moments and the focus from time to time on the country; on the other hand, Piazza Affari has more than doubled its value with the Italian Stock Exchange index that between the end of January 2013 and the end of January 2023 has gained 111%, including the contribution of reinvested dividends to the revaluation of prices and thus the total-return figure, with peaks of 180% for mid-caps that have returned strongly to the international markets due to their propensity to export.
Source Bloomberg
Within the list, it is possible to single out some excellences that underpin long-term trends in the country's competitiveness. Leading the gains over the last decade are companies such as Interpump (840%) and Amplifon (599%), which have catalysed the leadership they have achieved in international markets in their respective niches of industrial pumps and hearing aids, making them true champions of 'made in Italy'. The boom in demand for semiconductors did not leave Stm behind, which gained 808%, followed by two companies appreciated by investors such as Recordati in drugs for rare diseases and the Garrone family's Erg, which in recent years has refocused on renewables, abandoning its old refining business.
In the top ten of Piazza Affari's satisfactions also appear a couple of financials close in the maxi returns, with Cimbri's Unipol in insurance (+280%) after the acquisition of Fondiaria and the subsequent integration, and among banks Banca Generali (274%) led by CEO Gian Maria Mossa who arrived just 10 years ago focusing on a transparent and sustainable business model based on the quality of solutions and its bankers in consulting, tracing a unique growth in private banking. The other side of the coin sees Saipem and Telecom at the tail end, having suffered from the reorganisation dynamics and increasing competition in the sector.
In conclusion, we can say that even though equity investment has returned better returns than bonds in the past, the game is still open: will the great return of bonds expected in 2023 be able to hold its own against equity in this derby?
