Market Dynamics: Bets, Elections, and Geopolitical Impacts

After months of anticipating an imminent downturn, commentators now struggle to find concerning elements in the scenario, as the stock market continues its positive trend, with major indices reaching historic highs. But as Sun Tzu said in The Art of War, “The greatest danger is that which cannot be seen.”

The market is facing two major bets: the first concerns the increasingly widespread theme of artificial intelligence, with companies in the sector achieving enormous capitalizations and transforming global stock market dynamics; the second concerns the market’s expectation that interest rates will decline over the year, awaiting monetary policy decisions from Central Banks.

In short, the economic landscape presents challenges and uncertainties, including risks stemming from a potential increase in inflation, geopolitical tensions, and the numerous elections worldwide expected in 2024, which will significantly influence financial markets.

Therefore, it is essential to carefully consider, in investment management, possible tail events and risk factors for the economy, participating in the market with greater prudence and selectivity.

Discover why! Watch the analysis conducted by Lorenzo Fuscà, Head of Wealth Management, and Stefania Cardone, Investment Advisory at Banca Profilo.

WHO’S WHO by AssoNEXT – Banca Profilo

On March 21st, Banca Profilo had the pleasure of hosting the WHO’S WHO event by AssoNEXT.

It was a magnificent opportunity to delve into success stories and listen to the experiences of some of the brightest entrepreneurs and managers in Italy. Additionally, we witnessed moments of discussion with leading Italian institutional investors, from which constructive proposals emerged to make the EGM more attractive.

Thanks to all those who participated and made this evening a real success: Antonio Amendola, Dario Melpignano, Gian Paolo Rivano, Luca Mori, Luisa Franceschetti, Maurizio Ciardi, Paolo Rizzo and Walter Barbieri.

EGM Analysis 2023

The negative performance divergence between EGM and FTSE Italia All Shares widens.

In 2023, EGM surpassed 200 companies with 34 new IPOs, up from 26 listings in 2022. Total capitalization exceeded €9 billion, but averaged just below €40 million.

In 2023, the negative performance divergence compared to the FTSE Italia All Shares widened due to 1) limited liquidity; 2) loss of some benefits; 3) alternative financial activities that are more profitable as they are linked to the trend in interest rates.

Since 2021, EGM companies have shown growing revenues which are expected to continue in the three-year period 2023-2025 at an average rate above 15%, the EBITDA margin is estimated to recover already in 2023 until exceeding 2021 levels this year. Compared to our latest EGM Quarterly Report, consensus has lowered revenue and EBITDA expectations for 2023 and 2024.

Growth continues to be partly supported by M&A activity: in the last two years, on average, around 60 deals have been concluded.

What is needed to make a market segment that hosts Italian SMEs with high growth potential and good margins attractive? Find out the report by Francesca Sabatini, Head of Equity Research, and Michele Calusa, Equity Research Analyst of Banca Profilo.

DigitalPlatforms: Strengthening Financial and Asset Base

We are pleased to announce the completion of the hybrid financing transaction for a total value of 16.5 million in favor of DigitalPlatforms Group, a leader in the IoT and Cybersecurity sectors.

The transaction aims to support DigitalPlatforms in the implementation of its 2023-2030 industrial plan, focusing on the integration and consolidation of acquired companies in recent years, as well as investments in Research & Development activities. These include the design of high-tech products in the IoT, ICT, and Cybersecurity fields, targeting new sectors.

We acted as the Arranger in structuring the transaction and exclusive Placement Agent in raising capital, with a team composed of: Marco Baga, Head of Investment Banking, Alessio Muretti, Deputy Head of Investment Banking, Attilio Domenico Modaffari, Vice President, Francesco Ventura, Associate, Daiana Aurilio, Analyst.

For more information, we invite you to read the press release.

China-United States: the technological Cold War

With the September Back To School season, the technological Cold War between China and the United States has resurfaced. China has banned Apple phones for its state employees, just days before the launch of the new iPhone 15.

The response from US authorities was swift. They launched an investigation into the Pro-60, Huawei’s latest smartphone, alleging that it uses a state-of-the-art microprocessor that could only have been designed with American technology.

Now, as Huawei is regaining lost ground (with some improper state aid), Apple has lost 10% of its market capitalization and is at risk of losing 10 million Chinese smartphones. A real tug-of-war is beginning between the White House and the Politburo, especially with the upcoming American elections next year.

In this long, grueling tennis match that risks having only losers, what will happen?

Lorenzo Fuscà, Head of Wealth Management, and Francesco Menini, Head of Investment Advisory at Banca Profilo, explain in the video.

The AI boom in the markets: opportunities and risks

It is customary on Wall Street to say that, in the long run, pessimistic investors appear to be the “smarter” ones, but in reality, it is the optimistic ones who make the money.

In the last month, the American market has confirmed this narrative with positive performances, despite most analysts preaching caution. While the Eurozone’s GDP confirmed a “technical recession”, the stock markets are rewarding the growth sector, tech stocks and artificial intelligence in particular, issues notoriously more sensitive to monetary policy decisions.

What opportunities and risks will AI technology bring to the markets?

They explain it in the video, Lorenzo Fuscà Head of Wealth Management and Emanuele Fino Investment Advisory of Banca Profilo.

Markets in May: the American public debt crisis

In recent weeks, the markets have remained suspended in a kind of “limbo” between fears about growth and the end of rate hikes, also due to the crisis in the banking sector in the US, with the bankruptcy of three financial institutions which then caused a strong tension on the whole sector on a global level.

Another major risk that lies ahead is that relating to the overrun of the US public debt ceiling, Washington will have to raise the debt ceiling to avoid falling into the risk of insolvency: Republicans and Democrats have little time to find an agreement and a definitive solution .

What will happen to Washington? Will Republicans and Democrats be able to reach an agreement?

They explain it in the video, Lorenzo Fuscà Head of Wealth Management and Stefania Cardone Investment Advisory of Banca Profilo.