01:41 PM EDT, 09/05/2024 (MT Newswires) -- When using historical data, industrials have not performed well during prior bouts of rate cuts because of the coincidental nature of rate compressions = slowing economy, which does not make a great setup for earnings revisions, writes National Bank's Maxim Sytchev.

Staples, on the other hand, appear as the most defensive. Fiscal stimulus on the infrastructure side and continued industrial decoupling from Asia should lead to greater installed manufacturing capacity over the years. "We are, however, clashing somewhat against high by historical norms valuations, coupled with again weakening manufacturing PMIs," Sytchev notes.

National is trying to stick with names that will exhibit a counter-cyclical dynamic to an economic slowdown (RBA Global) or have something unique within the structural setup to emerge stronger post any dislocation. In the engineering consulting space, Sytchev now sees AtkinsRealis ( SNCAF ) as providing the best risk / reward skew as the nuclear refurbishment cycle / margin expansion potential seems compelling, especially at relative valuation which imputes a 40% discount vs. peers.

In the small cap space, Sytchev likes Russel Metals ( RUSMF ) (steel market is depressed) and Ag Growth International ( AGGZF ) (ag cycle is scraping the bottom).

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