European Cyclicals Eye Autumn Opportunity? Citi Analyst: Worst Is Over, Cyclical Stocks Show Investment Value

Beata Manthey, Head of European Equity Strategy at Citigroup, stated that European cyclical stocks—closely linked to economic health—have now reached an attractive entry point following a difficult period. Indicators such as Citi’s economic surprise index, broad-based earnings upgrades, and a summer rebound in business activity all suggest Europe is moving in the right direction.

In an interview with Bloomberg Television, Manthey said, "Autumn is an excellent time to enter cyclical stocks." While investors should still adopt a selective approach, she believes the worst may be behind us overall, and investors should consider unwinding their "underweight" positions.

Currently, European policymakers are actively taking measures to protect domestic industries from being squeezed between U.S.-China rivalry, with the automotive and chemical sectors likely having weathered their toughest phase.

She cited steel as an example: newly introduced EU steel tariffs have successfully pushed up internal prices, benefiting European manufacturers exempt from these duties. This demonstrates how protectionism—through "buy European" policies and targeted tariffs—can translate into advantages for Europe, helping build economic resilience.

Nonetheless, the main risk remains energy prices. For industrial sectors to gain real tangible support, energy prices need to fall sustainably, but geopolitical tensions have so far hindered this.

In terms of portfolio positioning, Citi currently favors European domestic stocks over exporters and consumer brands exposed to international markets.