“Central bankers have a very fine needle to thread to avoid frightening investors”

“The macro context is very positive, chiefly in the US, and this should be reflected in businesses’ results. These first-quarter results may be premature, but this should augur well, and we hope they will guide us toward a positive future,” highlighted Alberto Matellán, Chief Economist at MAPFRE Inversión.

On a macroeconomic level, the German investment confidence index, ZEW, has fallen somewhat below the level expected by the market. However, as the MAPFRE expert pointed out, the index still remains at very high levels, “so high that you have to go back to the end of the 1990s to find similar levels.” Nor can recent doubts over some vaccines lead to a change in perception, according to Matellán. “Economic actors have become accustomed to dealing with these scenarios, and governments have shown that they can respond with what is needed,” he added.

In this context, it is now up for debate whether there may be an overvaluation in some indices, which remain at peak levels. But Matellán doesn’t see it that way: “Is it cheap or expensive to pay 20 times a company’s profits? It depends. The stock markets aren’t expensive. So much money has been pumped into the economy in recent months that money itself is worth less, and so investors pay more per share.” The MAPFRE economist also sees a positive takeaway from all of this: “If this money moves into the wider economy, it will eventually reach businesses in the form of higher profits.”

In line with this massive injection of money, the leaders of various central banks have made announcements or are set to do so over the coming days. In Matellán’s view, they should not present anything new, since nothing has happened in recent weeks to cause any changes to the current trend. That said, Matellán stated that “they must thread a very fine needle so as not to frighten investors one way or another against a backdrop of very strong growth and an equally high inflation rate.”

Finally, as usual, Matellán offered his recommendations to investors. In the case of professional investors, there has been no change in strategy because no factors have made such a change necessary. For private investors, however, Matellán recalled the importance of saving in a difficult macroeconomic environment: Although prospects are improving, we are emerging from strong declines that have had a significant impact on employment.