Top Picks 2023 - Looking Beyond a "Widely-Trumpeted Recession"

There has never been so much talk as in recent weeks about the possibility of the economy entering a recession in 2023. A likely event after the many negative facts of 2022, which however already seems to be a foregone conclusion in stock market valuations, so much so that one has to wonder if after the recession we will also see the rebound, perhaps as early as during 2023.

Analyzing corporate earnings, we have seen a markedly divergent trend since last July: estimates for 2022 have been steadily revised upward while forecasts for 2023 have progressively worsened due to the jump in inflation, energy costs and lower consumer purchasing power.

Our GDP forecast for Italy in 2023 assumes growth slowing to +0.6% (after a robust +3.8% expected in 2022), with a slight recession at the beginning of the year, and then a recovery to an expected +1.8% in 2024.

For next year, our preference is for those companies that are able to ride out a difficult economic downturn, thanks to a solid business model, a balanced financial structure, and pricing power; with valuations that already incorporate downside risk, and with good visibility on expected dividends.

_{SOURCE: Intesa Sanpaolo Research elaborations and Refinitiv / IBES}