Bonds under pressure; gold and the Milan Stock Exchange outperform the rest

The past four years have been a period of great uncertainty for savers. The war that broke out in Ukraine in early 2022 shaped the course of subsequent events and, to some extent, continues to have repercussions to this day. The defining feature of the tensions arising from the war (exacerbated by events in the Middle East) has been the surge in inflation, which has jumped to just over 11 per cent. This is a level not seen for some time and one that has put savers under severe strain: the primary aim of investing is, in fact, to protect one’s savings from rising prices, and Italians have, in some respects, coped quite well.

The fact that deposits have not risen in recent years is also the result of decisions aimed at securing higher returns on liquid assets. Exposure to investment funds has grown, and the increase in bonds within the portfolio has been even more pronounced in percentage terms (they have effectively doubled). The government’s strategy of also focusing on retail bonds with an inflation-linked option (see BTp Italia) has been very important; this approach has worked very well in a period of high inflation.

Otherwise, the bond market has experienced one of the most turbulent periods of the last 50 years. The surge in inflation and the monetary tightening by the Fed and the ECB (which ended in autumn 2023) have left their mark. An ETF employing global bond strategies (hedged against risk and therefore incurring an additional cost) has, in practice, shown little change in net asset value from April 2022 to mid-July 2026. It was not until 2024 that prices began to recover, but this was not enough to more than make up for the decline of the previous two years. The performance is even worse if we limit exposure to eurozone government bonds alone. Therefore, an approach involving a mix of international bonds across various maturities has not been effective in combating inflation during this particularly challenging global period.

Equities have therefore proved to be a winning investment strategy. A US dollar-denominated ETF tracking the MSCI World Index (which includes developed countries) has risen by just over 60 per cent, whilst the US dollar has fallen by almost 5 per cent over this period. This equity rally has benefited over the past four years from the boom in artificial intelligence, which began to emerge as a market theme at the end of 2022. Over these years, the Nasdaq 100 index, which represents the epicentre of the technology sector, has risen by just under 100 per cent. This continuous surge was interrupted for only a few days following Trump’s announcement of tariffs in April last year.

But it was Europe that returned to the forefront on the stock market. Monetary tightening has given fresh impetus to the financial sector, and Milan was one of the leading stock exchanges, with a rise (excluding dividends) of around 105 per cent. Milan outperformed US technology stocks. After 26 years, the Italian stock market has reclaimed its all-time high, which had been reached at the height of the dot-com boom. Milan thus takes its place on the winners’ podium