Recession lurking? The fear is already in the prices of cyclicals and industrials

In Piazza Affari, September leads to prudent investment choices, with utilities, together with banks, taking the lion's share of managers' portfolios. "In October, too, the picture will not change," emphasises Fausto Artoni, president of Impact Sgr. "Both technical factors weigh on the markets (in September there is less liquidity than in other months because taxes are paid) and a constant, albeit contained, expectation of downward revisions in profits that is more on the cyclical side of the market. With the third quarter of the year looking weak on the earnings front, a correction is possible, but there should not be a radical change of scenery in Piazza Affari. "Central banks, the Fed in particular, are ready to cut rates but also to avert deep recession and keep markets at bay as we saw at the beginning of August." Gilles Guibout, head of Axa IM's European equities division, also expressed caution on Piazza Affari: 'The outlook is cautious. Despite good half-year results, signs of an economic slowdown are emerging in areas such as the US, China and Europe. This slowdown, which on the one hand favours the willingness of central banks to start cutting rates, on the other, combined with an environment of economic and political uncertainty, leads to a cautious attitude in the markets'. As Guibout points out, the uncertainty is accentuated by factors such as the political situation in France (the prime minister has just been appointed and the new budget law has to be adopted), and the elections in the US, which put opposing economic proposals on the table.

Industrials, luxury goods, semiconductors and cars are the sectors that are showing some weakness at this stage. 'Cyclicals,' warns Artoni, 'when the macro scenario changes from a stable phase towards soft lending, they are the first to do their homework. This is the case for quality companies such as Stm, Interpump, De Longhi and Brembo, which today have valuations at the lower end of the market, and which have all the requisites to recover and do well in the future.

In a phase of falling rates, Enel, Terna, Snam and all other companies in the sector active in the country's energy management remain attractive. 'They pay good dividends,' Artoni adds, 'and with the forecasts we have on the 2024 financial year, the earnings per share (P/e) indicator trades 10 times below earnings, a valuation that is on average lower than the historical figure of 20. However, if today we have a portfolio exposed to banks, asset managers, insurance companies and utilities, we look carefully at the cyclicals - and around November we could intervene if things start to change. Guibout, too, points to the utility sector (Terna, Enel and A2A), which could benefit from a possible interest rate cut and the ongoing energy transition. Although these companies have shown good results, they have been held back by high rates and could now see a recovery. "In the context of the energy transition," he adds, "we should not forget utility suppliers, such as cable manufacturer Prysmian, which are benefiting from significant investments in this area. The healthcare sector has also returned to growth, although it is poorly represented in Piazza Affri. Finally, the food sector offers visibility, with valuations in line with historical averages'.