Which asset classes lost investors most money in 2016?
20 Dec 16
Thanks to the end-of-year ‘Trump rally’, 2016 has been a pretty good year for investors in risky assets. However, not all asset classes have fared so well.
The Borsa Italiana has been the worst performer of all European stock exchanges in 2016, with the exception of the Athens stock exchange (-18%). The explanation is simple: a huge stockpile of non-performing loans is casting a dark shadow over the future of Italy’s banks. Financial services companies make up about a third of the index, and are down over 33% year-to-date, explaining all the underperformance.
The banks have led a strong re-rating rally that took shape after prime minister Renzi lost his constitutional referendum earlier this month. Interestingly, the loss of the referendum was supposed to increase the risk of an imminent banking crisis, but the opposite seemed to happen.
Italian banks were instead picked up by value investors attracted by their cheap valuations. If the value rally persists and a banking crisis is averted, Italian stocks could continue their rise through next year.
