Ftse Mib also recovered in May, but less than the other indices
Optimism over easing lockdowns and unprecedented measures taken by central banks and governments to deal with the crisis caused by the coronavirus contributed to supporting the stock exchanges, while signaling that tensions between the United States and China have rekindled.
Piazza Affari also recovered in May, with the Ftse Mib rising by 2.87%, but the Italian market underperformed the main equity indices.
This is due to the constant fears of a sharp slowdown in Italian growth, with a consequent increase in public debt and after the end of the ban on short selling.
It must be said, however, that the purchases by the ECB and the expectations of a further strengthening of the € 750 billion “Pandemic Emergency Purchase Program” at the meeting scheduled next Thursday, have allowed the BTP-Bund spread to decrease by 50 points basis.
Ftse Mib: Equita suggests caution. Here because
In the usual monthly report, Equita SIM analysts highlight that the performance of the main equity indices since the mid-March low suggests caution.
This is because it anticipates a rebound in the economy thanks to the very aggressive and rapid interventions of central banks and the support plans of governments.
Experts expect, however, that the reopening of the economy will take place with great caution and at a much slower pace than has happened in China.
The most likely scenario according to the Milanese SIM is a collapse of GDP in the second quarter of the year, a weak picture also in the third and a modest recovery in the last three months of 2020.
In addition, analysts point out the recession comes after a growth cycle that has been going on for over 10 years in the United States, during which there has been a significant increase in the aggregate debt of non-financial corporations.
Ftse Mib: analysts focus on defensive stocks
In this context, according to Equita SIM, it is necessary to continue to favor the defensive sectors, with low cyclicality and solidity of the balance sheets, avoiding concentrations of risk on cyclical securities or on bets that presuppose a rapid return to normal.
Experts explain that the valuation of the stock markets does not appear attractive: the S & P500, for example, is treating the 12-month price-earnings ratio at 21.5 times, which is the highest point since the 2000 dotcom bubble burst.
The reasons for being positive lie entirely in the “FED model” which compares the earning yields of the shares (5%) compared to the yield of the ten-year US (0.6%), basically as saying that “there is no alternative to the shares”.
In addition, the Fed has removed the risk analysis from its equation, since it is buying corporate speculative grade corporate bonds, leading to a compression of 90 basis points to 710.
Piazza Affari: blue chips and small caps to be put in the wallet
In light of these considerations, Equita SIM analysts in the recommended portfolio at Piazza Affari confirm a defensive positioning, remaining underweight compared to the benchmark, with an exposure of 83.1% compared to a neutral weight of 95%.
Experts favor defensive stocks like utilities, healthcare and telecommunications while maintaining an underweight to the financial sector.
The Milanese SIM in its portfolios is already positioned to benefit from the themes underlying the European plan: renewable energy, digital, (with a particular focus on cybersecurity), circular economy and public health with titles such as ENEL, Terna, Telecom Italia and FinecoBank among the blue chips, to which are added Acea, ERG, Falck Renewables, Inwit and Reply among the small caps.
In addition to those already mentioned, as for the other blue chips to be put in the portfolio in June, we point out Intesa Sanpaolo, Mediobanca, Exor, Leonardo, Moncler, ENI, Poste Italiane, Unipol, Recordati, A2A and Hera.
In the small-cap portfolio, however, Falck Renewables enters the best picks selection, therefore with double weight compared to the other securities, instead of Acea (after the good performance).