🇮🇹 Cosa fare con l'economia USA surriscaldata (Davide Serra)

Summary

The speaker discusses global economic trends, highlighting the focus on electrification and digitalization. They mention the US economy's high deficit and the Federal Reserve's intention to cut back, which may lead to a steeper yield curve and a potential rise in the decade ahead. In Europe, growth is modest, and the Central Bank of Europe is cautious, while Switzerland has already cut rates. Asian markets, particularly China, face structural issues, but investment sentiment is shifting towards support. Japan is exiting zero and negative rates, signaling a clear direction. Overall, the speaker foresees a moderately inflationary economy with positive growth in credit volumes and favorable conditions for the financial sector, which has underperformed in recent decades.

Takeaways

• 🌐 Global meetings have highlighted the crucial theme of electrification and the continuation of digitalization within economies.
• 🇺🇸 The United States is managing a 'hot' economy with significant fiscal and current account deficits, yet the Federal Reserve intends to cut back.
• 📈 Despite the potential for a steeper yield curve, short-term rates may decrease, which is beneficial for financial institutions.
• 🇪🇺 In Europe, growth is modest, and the Central Bank of Europe (CB) is slightly behind the curve on interest rate cuts, but there's no recession.
• 🇨🇳 China is not rebounding strongly, with structural issues persisting, leading to a shift in investor sentiment regarding its investability.
• 🇯🇵 Japan is at a historic moment, exiting zero and negative interest rates, indicating a clear direction for the future.
• 💹 The financial sector is expected to perform well, with equities trading at 5-6 times earnings and offering 8-10% dividends for the coming years.
• 📉 The bond market has already discounted much, with government or investment-grade bonds yielding higher returns than U.S. Treasuries.
• 🚀 Financials offer significant value in the current economic setup, with positive growth in credit volumes and favorable interest rates.
• 🔄 Inflation is expected to be somewhat higher due to U.S. fiscal and monetary policies, but the financial sector is poised to deliver strong results.
• 📈 Overall, the financial sector is set to thrive in both equity and credit markets, given the macroeconomic conditions.

Q & A

What is the main theme being discussed in the meetings the speaker attended?

The main theme discussed in the meetings is the electrification of the entire economy and the continuation of digitalization, with a focus on machine learning and artificial intelligence as the latest phase of digital transformation.

How does the speaker describe the current state of the United States economy?

The speaker describes the U.S. economy as 'hot', with a fiscal deficit of 78% and a current account deficit of 23%, leading to nearly a 101% overall deficit. The U.S. is managing this economy despite the Federal Reserve's intention to cut back.

What potential economic change does the speaker foresee for the United States?

The speaker foresees a possibility that the yield curve may become steeper, suggesting that the 10-year yield may eventually rise, despite short-term yields potentially falling. This could create opportunities in the financial sector.

What is the current economic situation in Europe according to the speaker?

Europe is experiencing modest growth but is not slowing down significantly, meaning there is no recession. The European Central Bank is slightly behind on interest rate cuts compared to the economy's needs, possibly due to misjudging temporary inflation in 2020-21.

What has been the recent trend in the Asian economy, specifically China?

China is not rebounding as strongly as expected, with structural issues continuing to persist. Investors have largely exited the market, leading to a perception that China is no longer investible. However, the speaker suggests that at current levels, China may find support due to the lack of investment.

What significant change is happening in Japan's economy?

Japan is experiencing a historic moment as it moves out of zero and negative interest rates. Although the change is small, the direction is clear, and the yen at 150 offers significant value in terms of currency.

What is the speaker's overall economic outlook?

The speaker sees a fundamentally higher inflation environment due to U.S. fiscal and monetary policy, with Europe experiencing slightly less growth. Despite this, the economy is not in recession, and credit volumes are starting to pick up.

How does the speaker view the financial sector's performance in the next few years?

The speaker is optimistic about the financial sector's performance, expecting it to do well in both equity and credit. Financial stocks are currently underperforming and offer attractive valuations with 5-6 times earnings and 8-10% dividends.

What is the speaker's perspective on the bond market?

The speaker believes that the bond market has already discounted a lot, with many bonds yielding 5% when U.S. Treasuries are at 4-4.5%. This suggests that the market has already factored in the monetary policy of the next 3-6-9 months.

What potential risk does the speaker identify for the bond market?

The speaker identifies a potential risk that at some point, inflation could be worse than expected, which could impact the bond market negatively while the financial credit continues to perform well.

Why does the speaker believe that financial companies offer significant value?

The speaker believes that financial companies offer significant value due to their current underperformance over the past 20-30 years, attractive valuations, and the expectation of higher profits from the current interest rate environment and volume growth.