The earnings reported by Italian companies in this first half of the year reflect overall positive trends. Although a handful of financial players are still unaccounted for, we expect banks to post strong results in the first half of 2017, with some selectivity.
This confirms the dynamics of recent months and leads us to look toward the next half year with a focus on corporate reporting, while also considering interest rate trends. In general, we are confident that staying invested in Italian financials will pay off and that interest rates will begin to rise again in the medium to long term. This means that summer will not undermine the current momentum on the Italian market, as confidence in Italy returns, in part due to the Ftse MIB’s high exposure to the financial sector.
One last observation concerns Italian small and mid caps, which certainly performed well in the first few months of the year and are now slowing, partly because of the summer. However, considering PIRs – Italy’s new individual savings plans - I think it might be worthwhile to include some of these securities in the portfolio in the second half of 2017.
Outside Italy, I believe that one theme to watch carefully after the summer will be oil, as we expect that the recovery seen in recent weeks will prove to be a short-lived rally and not a turnaround in the trend. This, alongside currency volatility, will throw markets off kilter, a situation that, if managed well, could stand to be an interesting source of returns.
By Massimo Trabattoni, Head of Equities for Italy at Kairos, for AdvisorPrivate’s Italian Times column.