Il Chiaro Finanziario Weekly Update: September 22 – 27, 2025

Markets at the Top: Euphoria, US Economic Slowdown, and the Crucial Interest Rate Challenge 🛑

The contrast between economic data has never been sharper. Although the US economy has shown exceptional strength, signs of slowing activity and uncertainty over tariffs and interest rates are creating an explosive tension. Meanwhile, Italy is growing slowly but gaining confidence. We analyze the strategic points of this week and the implications for the investor.

1. The Deep American Paradox: Past Growth vs. Weak Demand 🇺🇸

Market optimism is supported by a recovery that, on the surface, is undeniable. Second-quarter GDP was revised up to 3.8%, a robust growth rate driven primarily by consumer spending and substantial investments in high-tech sectors, particularly Artificial Intelligence (AI). This past strength has propelled stock indices higher.

However, activity is slowing. The Composite PMI index for September fell to 53.6, signaling a contraction in both the manufacturing and services sectors. A crucial paradox emerges, explaining why prices have not “exploded” as feared: although companies face higher costs due to new tariffs (dazi), they are unable to fully pass these on to customers. This is due to weak final demand and increasing competition, a clear sign of structural fragility that limits future growth prospects. Analysts predict a subdued second half due to this commercial uncertainty.

2. The Fed’s Trap: Rates, Inflation, and Confused Labor Data

The Federal Reserve is in an extremely difficult position, with its dual mandate (maximum employment and price stability) in open conflict.

PCE Core inflation (the Fed’s preferred measure) is stable at 2.9%, a value that remains well above the 2% target. This persistence limits the scope for overly accommodative monetary policy. At the same time, the labor market sends mixed signals: although initial jobless claims have decreased (a sign of strength), the number of long-term unemployed individuals (continuing claims) is rising.

The Fed has cut rates, but the internal debate is heated. The resilience of the US economy and the mixed labor signals complicate the path forward. Some members push for further cuts to avoid stifling the job market, while others, the more “hawkish,” call for a patient approach to avoid reigniting inflation amidst heavy tariffs.

3. The European Context: Confidence Anchored to Slow Growth 🇮🇹

While the US struggles with uncertainty, Italy shows a slow recovery supported by domestic market psychology.

The Italian consumer confidence index rose to 96.8, driven by improved views on the general economic situation and the possibility of purchasing durable goods. However, GDP growth remains contained. Prometeia estimates indicate 0.5% this year and 0.7% next year. About half of this growth is driven by the PNRR (National Recovery and Resilience Plan), while household spending is only slowly picking up. In summary, Italy is gaining confidence but remains anchored to modest growth.

4. Global Markets: Divergence and Necessary Caution

Global markets reflect deep uncertainty, showing a clear divergence among exchanges.

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Conclusions: Financial Discipline in Uncertainty

The markets are at a fundamental crossroads. Euphoria is driven by strong historical data (GDP), but the future is limited by signs of slowing activity and macroeconomic risks (tariffs, rates).

Don’t chase euphoria. Now is the time to ignore short-term movements and focus on the fundamentals: weak demand and Fed uncertainty create a highly risky environment.

Maintain discipline. Investors must maintain maximum discipline. In a context of uncertainty, the wisest approach is to await clear confirmation of the economic direction before taking aggressive positions, prioritizing the protection of portfolio capital.

5. Stock of the Week: Ituran Location and Control Ltd.

In a context of uncertainty and volatility, attention shifts to companies with solid cash flow, high dividend yields, and resilient business models.

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Ituran (NASDAQGS:ITRN) is a global technology company specializing in vehicle location, security, and fleet management (VLM) solutions. It provides essential services such as stolen vehicle recovery (SVR) and logistics management in South America, Israel, and other regions, operating in a sector with stable demand.

Unique Strengths: Quality and Yield

Ituran stands out for its excellent fundamentals, indicating high-quality financial management:

• Superior Profitability: It boasts an impressive ROIC (Return on Invested Capital) of 27.1% and an ROE of 29.8%. This signals that the company is extremely efficient at generating profit from invested capital.
• Impeccable Balance Sheet: The company has a balance sheet almost free of net debt and abundant liquidity (Current Ratio 2.2x), offering a crucial margin of safety in difficult economic scenarios.
• Generosity: It offers a high dividend yield of 5.2% and, crucially for long-term investors, has maintained the dividend for 20 consecutive years.

Risks and Outlook

Despite solid financial quality and a potential 23.0% upside according to analysts, future growth requires caution. Revenue growth projected for 2025 is modest (1.9%), making the P/E of 12.0x slightly high compared to the expected rate of expansion.

The Verdict: ITRN is an option for those seeking quality, stable dividends, and capital protection in a low-growth environment.

Disclaimer and Source: This content is for informational purposes only and does not constitute investment advice.