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Interest rates and corporate defaults, outlook for the coming months

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  • Financial markets/economy
Posted on 24.07.2024

In view of an easing of monetary policies, the pressure on the credit market might decrease in the coming months, but that market still remains vulnerable to a number of possible scenarios. Pressure on the credit market may decrease Credit market dynamics have been dominated in recent times by inflation and interest rate variables. The cycle of rising interest rates has put pressure on the credit market, increasing the cost of borrowed money, both in the form of mortgages and bond issues. However, barring any shocks or reversals of monetary policies, the situation should remain stable and slowly progress towards improvement, say analysts at S&P Global Ratings, in particular the global head of research at S&P Global Ratings, Alexandra Dimitrijevic, interviewed in ‘Il Sole 24 Ore’ by Maximilian Cellino. The rate cut and the trajectory of corporate defaults According to S&P Global Ratings' forecasts, the European Central Bank is expected to cut interest rat ...

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Has the time come for small-caps and value stocks to make a comeback on Wall Street?

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  • Financial markets/economy
Posted on 23.07.2024

A small revolution seems to be happening in the US financial markets: a revolution in the etymological sense, i.e. a reversal in the performance of certain equity segments. The rally of small-caps and ‘value’ stocks in the US As Karen Langley points out in the ‘Wall Street Journal’, small-caps have achieved record-breaking results in recent days: in just a few days, the Russell 2000 index - an index that groups together small-cap companies in the US - has achieved its best margins compared to the S&P 500 since 1986. But even in the case of the comparison between ‘value’ and ‘growth’ things seem to have turned upside down: the Russell 1000 Value recorded, again in the space of a few days, the best result over its Growth counterpart as not since 2001, in the aftermath of the bursting of the dotcom financial bubble. A rotation in progress on Wall Street? Langley writes that the question in the markets today is whether this rotation i ...

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Joe Biden withdraws from White House race: what changes for markets?

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  • Financial markets/economy
Posted on 22.07.2024

Current U.S. President Joe Biden has decided that he will not run for a second term in the White House. At the same time, Biden has given his support to the candidacy of his vice president, Kamala Harris. What changes now for the financial markets? Joe Biden gives way to Kamala Harris as challenger to Donald Trump It is impossible to say as of now whether Biden's dropping out for a second reelection will succeed in making Democrats make up their current disadvantage over Republicans, who are firmly led by former President Donald Trump. Kamala Harris's candidacy will first have to win endorsement from the Democratic Convention to be held in mid-August in Chicago and, second, win the election in November. The outlook on a Harris administration Should the Harris-led Democrats win the election, as Chris Matthews (“Market Watch”) writes, it is likely that the trajectory of economic and financial policies would follow the groove traced by Joe Biden and his administrat ...

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Commodities and other promising sectors for this year

Posted on 19.07.2024

Looking ahead to the coming months, here are some opinions from investment managers, who analyse the outlook for commodities but also for two other asset classes (equities and bonds). Commodities, the push for sustainability What are the prospects for the commodities market? In this regard, Sandra Riccio, in 'La Stampa', reports some considerations from the analysis of Nannette Hechler-Fayd'herbe (Head of Investment Strategy, Sustainability and Research, Cio Emea) and Luca Bindelli (Head of Investment Strategy at Lombard Odier). According to the two managers, the commodity sector will benefit from the growing demand for clean energy: in other words, the demand for commodities that are fundamental for the production ecosystem linked to the energy transition and sustainability will grow. Gold and its price records As one can read further in Riccio's article, the two managers also adopt a 'constructive' approach with regard to another raw material, which has be ...

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All about Novo Nordisk, the multinational pharma star among European companies

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  • Financial markets/economy
Posted on 18.07.2024

Thanks to the success of drugs against diabetes and obesity, a Danish company, Novo Nordisk, has reached the highest capitalisation in Europe (now around USD 630 billion). Novo Nordisk has reached the highest capitalisation in Europe Ozempic and Wegovy are the two names of anti-obesity products that have experienced great success. If one adds to the marketing of these two successful drugs the fact that the company in question produces half of the world's insulin, one can understand why Novo Nordisk has now become not only one of Europe's largest pharmaceutical companies, but even one of Europe's largest companies. But that's not all: as Georgia Banjo points out in '1843', the Danish company has the largest capitalisation in Europe, having managed to surpass even LVMH (around USD 380 billion). The weight of Novo Nordisk on the Danish economy Novo Nordisk is today the flagship of the Danish economy, so much so that, according to Banjo, the company's perfor ...

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ETF market growth forecasts in Europe

Posted on 17.07.2024

According to forecasts by EY Ireland, the trajectory of index funds (ETFs) in Europe is expected to continue growing in the coming years. ETF market forecasts in Europe between now and 2030 The ETF market is also growing in Europe, but what is the pace of this growth? In this regard, Funds People magazine (in an article by Consuelo Blanco) reported on some data provided by EY Ireland in a study entitled 'Elevating ETFs - Digital Assets, Market Trends and Sector Trajectories'. According to EY Ireland's forecasts, ETF volume growth is likely to be 15% per year between now and 2030. This means that, by that date, the volume of index funds will be $4.5 trillion. The boost provided by active ETFs A boost to the sector (especially noted in the US, with a 250% increase from 2020) is expected to come from so-called 'active ETFs', i.e. index funds whose basket does not passively copy a market index, but is actively structured: as we read in 'Funds People', these ...

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An overview of the banking sector between challenges and opportunities (in relation to rates)

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  • Banks and banking products
Posted on 16.07.2024

A global report provides an overview of the world's largest banks. Monetary policies drive banks' gross profits 'Il Sole 24 Ore' reported, in an article by Alessandro Graziani, on some of the results of the 'Top 1,000 World Banks', a list of the largest and most important banks in the world, compiled by The Banker magazine. The first data highlighted by Graziani is the 14% increase in gross profits, which can be attributed to the rise in interest rates: in fact, banks' rates are adjusted to those of the central banks; it follows that higher rates also mean higher profits on banking products, namely mortgages and loans. The top-10 rankings are Chinese banks and American banks In this ranking, the top four positions are held by Chinese banks. This applies to Tier 1 capital as well as assets. In terms of Tier 1, four US banking giants follow: JP Morgan, Bank of America, Citigroup and Wells Fargo. Closing the ranking are two more Chinese banks. The top Europ ...

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Rates, inflation and the assassination attempt on Trump: outlook for US markets

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  • Financial markets/economy
Posted on 15.07.2024

Inflation, rates and elections, including the assassination attempt on former President Donald Trump, are some of the factors influencing the dynamics and outlook in US markets these days. Inflation, interest rates and the Federal Reserve After the inflation results, which fell to 3% in June, markets seem increasingly inclined to believe that the US central bank, the Federal Reserve (Fed), will cut interest rates not just once but twice this year. If this were to happen without an economic recession occurring, it would be the so-called 'soft landing'. In other words, the gradual end of restrictive monetary policies would be due not to a critical economic situation, but to the Fed's achievement of its inflation target. The consequences of the attack on Trump In the meantime, the stock exchanges reacted to the attack that (during a rally in Pennsylvania) threatened to kill former president and White House candidate Donald Trump, who was fortunately only injured in the ear ...

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US inflation, rates and the consequences for the markets

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  • Financial markets/economy
Posted on 12.07.2024

US inflation data, as well as the subsequent decisions of the North American central bank, are always awaited with great interest even by investors who are geographically far away. How so? The importance of US inflation and interest rates Why is US inflation so important for markets around the world? A crucial reason lies in the size of the US stock market, as well as the role of the dollar as a reference currency. In fact, inflation influences both market performance and the decisions of the Federal Reserve (Fed) to a certain extent. Usually, high rates tend to dampen the growth of financial markets. Nevertheless, the Fed's restrictive monetary policy has not prevented Wall Street from breaking one record after another. But not all segments of the US economy moved at the same speed. The consequences of inflation and interest rates Inflation can act in many ways on financial markets: consumption, corporate profits, flight to safe haven assets, etc. Similarly, interest rates als ...

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Attention rises for energy markets, but volatility remains a problem

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  • Financial markets/economy
Posted on 11.07.2024

In the Wall Street Journal, Anna Hirtenstein and Caitlin McCabe write about a sector that has increasingly attracted the attention of investment funds, especially hedge funds: the energy sector. AI's demand for electricity Within the energy sector, a prominent role is played by electricity. This form of energy can count on at least two important growth drivers. The first is the drive towards the electrification of areas such as mobility, which until not so long ago had been dominated almost exclusively by fossil fuels. The second driver is represented by none other than artificial intelligence: here, the International Energy Agency predicts that electricity consumption will increase tenfold over the next two years. The volatility of energy markets But how volatile, and therefore risky, the energy market is. The answer is a lot. In the 'Wall Street Journal', Hirtenstein and McCabe report an interesting comparison by McKinsey: if the price of oil has fluctuated between $7 ...

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Electric car updates: from Tesla to the Chinese

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  • Financial markets/economy
Posted on 10.07.2024

Electric car market dynamics: from the latest news on Tesla to the prospects of tariffs on Chinese electric car imports. Better-than-expected deliveries boost Tesla's share price During the first half of this year, in contrast to the rise of US stock market indices (including the Nasdaq), Tesla's shares have, on average, declined in value. In the last few days, however, shares of the electric car manufacturer founded by Elon Musk have risen sharply again. This recent stock appreciation was made possible by the arrival of delivery results: although down from last year, these figures were above analysts' expectations. Awaiting second quarter financial results As Lora Kolodny ('CNBC') writes, one of the next important dates for Tesla is 23 July, when the results of the second financial quarter of 2024 will be announced: in particular, the results of the automotive sector will be decisive (in April, the automotive results were disappointing). Since then, Tesla has m ...

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Bitcoins slide downwards

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  • Financial markets/economy
Posted on 09.07.2024

After reaching an all-time high of $73,000 each in March, bitcoins have seen their price gradually fall to between $55,000 and $56,000 these days. End of the post approval euphoria of bitcoin ETFs and halving In March, the Security and Exchange Commission's approval of spot bitcoin ETFs and subsequent halving had generated euphoria in the cryptocurrency market, causing bitcoins to break their all-time high. That enthusiasm has waned in recent weeks due to a series of events that have resulted in a temporary bearish cycle in the markets. The persistence of a 'hawkish' Fed First, as Ryan Browne ('CNBC') points out, there is the persistence of restrictive monetary policy by the Federal Reserve (Fed). In the June meeting, the US central bank still spoke of the need to consolidate the downward trend in inflation: in other words, the Fed will only change its monetary course once there are clear signs that the 2% inflation target can be reached. The Mt. Gox platform c ...

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