Investment Analyst Dario Giordano: Structural Opportunities in the Equity Market Amidst the US Treasury Crisis and Tax Reform Turmoil
Recently, European stock markets have gradually stabilized amidst volatility. Although US debt risks continue to overshadow the markets, the German Frankfurt DAX Index has reached new highs, while the Italian FTSE Mib remains in a consolidation phase above the 40,000-point mark. Simultaneously, Bitcoin prices have hit new historical records, approaching $110,000 intraday, becoming a central focus of global financial markets. On the macro policy front, the advancement of the US tax reform proposal has sparked concerns over an expanding fiscal deficit, intensifying volatility in liquidity expectations. Technology and luxury sectors have come under significant pressure, whereas defensive industries such as banking and defense have attracted capital inflows. Investment Analyst Dario Giordano points out that, amid the convergence of multiple macro variables, investors should proactively optimize their asset allocation strategies to navigate a new round of uncertainties and potential opportunities.
Rising US Treasury Yields and Tax Reform Expectations Disrupt Market Sentiment
The recent push by the US government for the "Tax Reform Act" aims to stimulate economic growth, but the potential issue of an expanding fiscal deficit has raised market caution. Some rating agencies have already downgraded US sovereign credit, reflecting growing concerns over the debt servicing capacity of the country.
Against this backdrop, the yield on 10-year US Treasuries has risen above 4.5%, with the 30-year yield surpassing 5%. The high interest rate environment exerts substantial pressure on equity valuations, particularly impacting growth assets that rely on future earnings expectations. The Dow Jones Index fell by 1.91% in a single session, while the S&P 500 and Nasdaq dropped by 1.61% and 1.41% respectively, reflecting the heightened market sensitivity to tightening liquidity. Investment Analyst Dario Giordano notes that the continued rise in long-term rates will further erode expectations of monetary easing, requiring investors to reassess the role of leveraged capital and monitor whether central banks will adjust their policy stances accordingly.
Structural Strength in European Equities, Fundamentals Support German Market Rally
Despite global market pressures, there is a clear divergence within European equities. The German stock market has performed strongly, mainly due to robust growth in domestic manufacturing, exports, and emerging technology sectors. Investment Analyst Dario Giordano believes this trend indicates that, under macroeconomic uncertainty, markets are more inclined to allocate capital to economies with strong fundamentals and stable structures.
Moreover, safe-haven funds are seeking certainty within Europe, with the profitability and international competitiveness of German companies making them a preferred choice for capital allocation. The Italian market, on the other hand, exhibits a volatile pattern, reflecting the tug-of-war between high valuations and policy expectations.
Accelerated Sector Rotation: Defensive Industries Favored, Technology Stocks Face Adjustments
As the macro environment grows increasingly complex, the market is experiencing marked sector rotation. Amid persistent high interest rates and uncertainty, traditional defensive sectors are regaining attention. In the European market, the defense industry has become a standout, with companies such as Leonardo and Fincantieri attracting significant capital inflows, underpinned by the EU €150 billion security fund policy. The banking sector has also demonstrated resilience, benefiting from merger and acquisition expectations and optimized balance sheet structures, which have boosted market confidence in their profitability.
In contrast, the technology sector is facing greater pressure. Heightened global geopolitical risks and stricter regulations have become key factors limiting the revaluation of technology companies. For example, the recent decline in the share price of Stmicroelectronics reflects a market reassessment of the profitability of technology firms amid a tightening export environment and rising R&D costs.
Investment Analyst Dario Giordano recommends prioritizing allocation to high-quality companies with stable cash flows and dividend capabilities to mitigate the negative impacts of market volatility. At the same time, combining ETF and multi-asset allocation strategies to navigate sector rotations, and utilizing technical indicators such as RSI and MACD to determine entry and exit points, can enhance the systematic and precise execution of investment operations.