“Il bag recovery after the March crash has no precedent. In 2008 the recovery was much slower, even in the presence of a much lower GDP loss than that which will occur this year, which will be in the order of 10% on a European scale”. That's what he says Alessandro Fugnoli, Kairos' strategist, in the latest episode of his monthly column "Al Quarto Piano".
“In the last two weeks – continues Fugnoli – the recovery extended to cyclical sectors, the most penalized so far, to the point of being seen as close to insolvency, in certain cases. Europe was above all driving the recovery and the process also involved the single currency, easing the defensive stocks that had characterized the first phase of the rise”.
At this point what should we expect in the short and medium term? According to the Kairos strategist, “this phase can still last a few weeks. Indeed, in the rest of the year this kind of rotation will be a key feature of stock market performance. At the trend level of the index a lateral consolidation is to be expected, rather than a continuation of the increase".
In fact, the stock exchanges "at the moment are generous: in the US we are at 22 times the profits of 2021, but there are still sectors that are cheap, so there is no shortage of space for market rotations".
As for the drivers that will guide the market in the coming months, certainly the coronavirus “it will still give rise to discussion – adds Fugnoli – above all because it will influence the propensity to consume and invest”. But it will also take center stage the contrast between the US and China, "which will have repercussions on Europe" and "will intensify in the last stages of the American electoral campaign".
Its the US presidential elections are the third element that must be taken into account: “Certainly Biden is not a radical like Sanders would have been – underlines Fugnoli – but in his program some points are indicated that would penalize the profits of many American listed companies, such as the cancellation of some cuts in taxes” decided in 2017 and the possible introduction of a “financial transaction tax”.
In these conditions, for Fugnoli “it can make sense hold the shares acquired or held in portfolio during these pandemic months (except for some easing of stocks that have benefited in particular from the Covid season), because monetary and fiscal policies are ultra-expansive and could become even more so at the first sign of weakness".
