Top Picks 2026: the value of Normality
INSIGHTS - ECONOMIND
Top Picks 2026: the Value of Normality
Top Picks 2026: the Value of Normality
After six consecutive years (2020-2025) marked by market shocks, 2026 looks set to be a ‘normal’ year from a macroeconomic and equity market perspective.
In this podcast, Giampaolo Trasi, Head of Equity and Credit Research at Intesa Sanpaolo, analyses the stock market factors that should lead to this ‘normality’ and the earnings growth forecast for the next two years. This is without forgetting the associated risks and with an eye on the challenges posed by artificial intelligence.
Podcast - complete transcription
My name is Giampaolo Trasi, Head of Equity and Credit Research di Intesa Sanpaolo.
In this episode I will present the main conclusions of our report Top Picks for 2026
After six consecutive ‘exceptional’ years, marked by several external shocks, from Covid to Liberation Day, 2026 is set to be a ‘normal’ year for Italy and the Eurozone, and it could be the first since 2019 from a macro, earnings, and equity market angle.
We assessed several equity market drivers (macro, geopolitical, earnings), highlighting their path towards sustainable medium-term ‘normalised’ levels. Then, we explore the investment implications of ‘normality’, and they look encouraging to us: a further small decline in equity risk premium, a moderate multiples expansion, and a broadening participation in the equity market rise (sector- and size-wise). True, we are in a mature bull market, with over 3 years of equity rise behind us, and there is little room for complacency.
After a soft 2025, earnings growth in Italy should follow a K-shaped trend, with a low double-digit recovery in 2026 and 2027 (Earnings per share CAGR at +12.5%); the Euro Stoxx should follow the same path. We calculate that, net of Stellantis’ earnings (expected to rebound), FTSE MIB underlying 2026 EPS growth would be +8%, namely a ‘normal’ trend, last seen in 2019 in Italy. We expect a broader earnings growth participation, with Cyclicals and Energy, adding to Financials.
We expect an 8% upside for FTSE MIB at Year End 2026, with a moderate Price/Earning 2026 expansion, from 12 to 13.2 times (in line with 10Y average), and Equity Risk Premium down to its 35Y average (c.5.5%), assuming 2026 and 2027 earnings growth to stay at current levels.
Given our base case scenario, we see risks to the upside: a stronger recovery in real disposable income in Eurozone; a reacceleration in the investment cycle; we also see risks to the downside: trade diversion from China to Europe; disappointment from expansionary fiscal plan in Germany. We expect GDP growth in Italy at 0.8% in both 2026 and 2027, marching close to its potential.
Finally, we also analysed the AI challenge cross-sectors in our coverage; we believe we are not in an AI-driven bubble in equity markets, based on our analysis.