The financial world is undergoing rapid change, characterized by macroeconomic tensions and aggressive monetary policies. In this context, selectivity in choosing investments has become crucial. In an article published in Wall Street Italia, Massimiliano Marzo, Professor of Political Economy and director of the Master course in Wealth Management at Bologna Business School, explores the current dynamics of financial markets, with a focus on monetary policy, inflation and the importance of selective investment choice. 

Inflationary tensions in 2022 prompted major central banks, such as the Federal Reserve and the ECB, to respond aggressively. The succession of interest rate increases has been remarkably frequent, a phenomenon rarely seen in monetary history. This has two main effects on financial markets: the rearrangement of the structure of correlations between different asset classes, which facilitates the creation of more effective hedging positions, and the other side of the coin, which is the fact that the reduction in inflation could pass through a recession, which is already under way. If the recession is severe, the impacts on equities will be heavier.

In a phase of risk repricing such as the present, selectivity in choosing investments, both bonds and equities, is crucial. As opposed to what we have seen in the past, we are not observing strong tensions in equities. Many sectors remain very profitable, albeit expensive. Another noteworthy aspect is the international phenomenon of reshoring, which has led to a resurgence of domestic investment in Europe and the United States. This has had positive impacts on employment and could be a key trend in the near future.