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© Banque Havilland

Stefano Torti, directeur Investissements / Group Head of Asset Management & Advisory

Banque Havilland: How should we react in an inflationary

environment? Interview by Milena Radoman

The war in Ukraine is weighing on growth. «In the event of inflation, the business model counts
more than the economic sector when it comes to investing,» analyses Stefano Torti, Group Head of
Asset Management & Advisory at Banque Havilland.

The start of the year has been difficult for the of asset managers and research institutes increased competition, lower margins, a non-
financial markets. What are the main reasons remain focused and recommend investing in captive distribution channel and, ultimately,
for this equity volatility? stocks with growth potential, in cyclical versus a «significant price elasticity». On the other
The start of 2022 has seen one of the most defensive stocks, certain sectors versus to hand, the second will benefit from a loyal
brutal stock rotations on record. Many «growth» others; even if it is a quick, and partly effective, customer base, large margins, a captive
stocks that were favourites in 2020 and way to ride the first wave of market rotation, it distribution channel and a relatively inelastic
2021 have suffered sharp declines, specially is a naive approach to investing in the long term price. If, for these companies, the costs of
highly-valued tech companies that have in a persistent inflation scenario, in our opinion. transport, wages and raw materials increase,
benefited well from the «Covid economy». it is clear that the impact on profits or their
Conversely, value stocks and sectors such as So what would be a reasonable approach ability to pass on inflation to end consumers
energy, banks and other cyclical stocks have to take? is very different.
rebounded dramatically from low valuations. Ultimately, the only way to assess whether a This is obviously just an example but there are
This development is largely explained by stock, and therefore a company, is capable of parallels like this in all sectors, as well as in
the sharp rise in realised inflation, inflation thriving in an inflationary environment is to look value and growth stocks. It’s hard to predict
expectations and, therefore, interest rates and at its business model, regardless of industry. how long inflation will last but when it comes
monetary policies. Let’s take two clothing and accessories to safe long-term investing, it’s important to
manufacturers as an example, one selling bags take a closer look, as sectors and styles can be
How do investors position themselves in such at €50 and the other at €3,000. Although they misleading. In the long term, a value will follow
an environment? are both classified in the same industry, the the economic performance of a company and
In a high-inflation environment, the majority former will likely face low brand recognition, each company is different.

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