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CFA April survey points to economy picking up steam in six months from now

by Corrado Poggi

The Italian financial professionals remain positive on the prospects for Italy’s economic recovery, especially when looking at six months from now. This is the main take-away that emerges from the April survey conducted among its members by CFA Italy, the Italian charter of the CFA Institute, in collaboration with Il Sole 24 Ore RadiocorPlus.

The survey took place between March 20 and 31 and saw the participation of 51 professionals. Overall 64% of respondents do not expect the current situation of the Italian economy to change substantially in the short term, but the situation changes when referring to the next six-month period. The percentage of those who expect the economy to pick up steam rose in fact in April to 34%, while 52% of respondents see stable conditions and a further 14% thinks that the economy will get worse. The difference between the two opposite poles, optimists minus pessimists, gives a final result of 20, which represents the new level of the CFA Italy RadiocorPlus sentiment index. In March the index stood at 8.5 points.

In detail, the survey participants see an improvement in economic conditions in the euro area while the US economy is expected to plow ahead at current rates. Inflation is seen rising in every region, particularly in the United States. Interest rates are seen rising globally and especially in the US where the Federal Reserve has now raised the cost of money to 1% and is planning more 2 or 3 more hikes in 2017. In Europe on the other hand the ECB is expected to keep the quantitative easing program in place until the end of 2017.

For what concerns stocks markets, the respondents are now expecting a rising trend for the Italian and for European shares in general, while Wall Street is seen as already close to the peak. In the forex arena, the dollar is expected to strengthen further on the wake of rising interest rates while in the commodities market oil prices are likely to remain at current levels.

“The expectations of the CFA certified professionals,” said Luca Grassadonia, CFA Investment Banking Analyst at JCI Capital Ltd, “are consistent with the scenario of a general recovery of both the economy and inflation – even though long term interest rates are expected to rise slowly over time.”

“The improvement in expectations for Eurozone equities, “ Grassadonia added, “is also the result of stock prices now being relatively more favorable.”

Participants to the survey were also asked to give their opinion as to how profitability will change in the main sectors. According to 61.5% of them, profitability will improve over the next six months both in the banking and in the insurance sector while 46.2% of the respondents expect more profits in the automotive sector.

However a further 28.2% slice believes that the auto-makers will not see improved earnings and an additional 25.6% segment expects a deterioration. With regard to oil and utilities sectors, finally, the majority - in both cases at 51.3% - believes that profitability will remain unchanged.