short bonds (up to 5 years) and installment plans against uncertainty – Corriere.it

Short corporate bonds and installment investment plans. According to Bruno Rovelli, at the head of the strategies of BlackRock Italia – the Italian arm of the American asset management giant, which has now exceeded ten trillion dollars under management – these are the pillars of a very prudent plan for moving in a world that is changing rapidly and which, for now, offers investors a lot of uncertainty. Bond yields, however, are back – says Rovelli -. And therefore considering bonds up to five years, especially in the United States, allows at least to lower the impact of inflation. The other idea, knowing that it is never possible to pinpoint the low point of a crisis in time, is to enter the markets in small steps, using the pac tool. Starting a path of this type now – says Rovelli – allows us to make the most of the current drop in priceskeeping risk and volatility under control.

Rates and inflation

But what scenario awaits us? Further rate hikes. At the moment. And starting to descend again this time will not be easy. As for America, today the Fed Funds are in the 3.75%-4% corridor and we expect a peak at 5% in the first quarter of 2023, but no cuts over the next year. While on the front of the European Central Bank the deposit rate at 1.5% with an estimated peak at 2%. Will it be enough in perspective to keep the cost of living at bay? According to BlackRock (but the majority of large investors think so) the cost of living will not remain at the levels where it is now, but – even after the treatment of the Central Banks which will induce or accompany the slowdown – it will not even return to where it was before the crisis in progress. We see inflation stabilizing at 3% in the United States and a little above 2% in Europe, says Rovelli. For the Old Continent, therefore, we are talking about a level about 1 and a half points higher than the average 1% that accompanied European citizens and businesses from 2008 until the sudden rise in gas & co. (started, we recall, before the Russian invasion of Ukraine) which changed the global scenario.

The decline in demand and the ecological transition

But how can you describe the world spinning again with high inflation rates? First of all, explains Rovelli, you have to understand that in the last thirty years supply has grown faster than demand. And that now it is no longer so. There are structural elements that have changed, which have a strong influence on the cost of living, and which, at least for now, will not go back to the way they were before, says the strategist. Here are some of them: we no longer have the peace dividend collected in Europe after the end of the Soviet Union, globalization has given way to a strategic confrontation between China and the Western world, the aging of the population and the end of liberal policies in the reception of migrants create imbalances in work. It’s still: The ecological transition is a force driving inflation because cleaning sources has a cost that has so far been difficult to see and quantify.

The new thrusts

These are big underlying trends. Which, in fact, have changed towards compared to the recent past. Then there are more economic factors, explains Rovelli. Like the post-Covid demand adjustment and war. In both cases we are dealing with phenomena that have exacerbated (now things are a little better) the problem, however structural, of the new imbalance between supply and demand. In many sectors, the pandemic shock has caused cuts and adjustments, while it is still impossible to understand where the unprecedented thrusts that have interrupted or modified the production chains will lead as they were built and used to date.

deglobalization

According to Rovelli it is premature to declare the globalization process finished: It is not easy to reconfigure the global chains. It requires a lot of time, investment in logistics and infrastructure, he comments. And, for the moment, even if it is clear that even after the end of the war the world will not return to its previous condition, the numbers do not certify the end of the previous system. We have, for example, evidence that direct investment is accelerating in the United States, but also evidence that there is no mirror deceleration in China, concludes. Then the big tug of war between giants over technology and commercial matches in full swing. Giving early verdicts can throw investors off track.