August closed with increases in the main indices, although in some cases—as in the Ibex 35—the increases were small. In an interview with Radio Intereconomía’s A Media Sesión program, Alberto Matellán, chief economist at MAPFRE Inversión explained: “statistically, the chance that the Ibex can recover 37 percent (to recover the 27 percent loss it accumulated over the year) in three months is low, but there are always surprises.” And in his view, “this does not take away from the fact that stock market expectations are moderately positive.”
In this still uncertain climate, there has been a strong decorrelation between the behavior of Wall Street and European stock exchanges. In Matellán’s view, this is due to divergent economic developments, the fact that more dollars are being made than euros and the safe-haven effect itself, which favors US stock exchanges. But it also points to another factor — the very nature of how the indices are composed. And that “American indices include the largest players at the moment, in other words, the technology companies.” In addition, passive management tends to magnify these movements.
The Fed’s increased aggressiveness has led to the euro reaching a two-and-a-half-year high against the dollar. Along with the faster rate at which the US central bank is printing bills, according to Matellán, the strength of the euro also comes from increased confidence in the EU and the reduction in the risk of the euro breaking up, following the strong statement that was made with the agreements that were reached in June. Even so, he believes that “the burdening effect that a more expensive euro has on the EU is reduced.”
The ECB is meeting again next week, although the chief economist does not believe that further measures are necessary. Moreover, he believes that the statements made over the last couple of days by Philip Lane, the ECB’s Chief Economist, on the exchange rate are indeed a sign that the monetary institution could be engaging in verbal intervention without taking further measures. And according to Matellán, this does not mean that the response to the pandemic is weaker in the EU than in the US. “In Europe, there has been a very significant change in mentality that has partly gone unnoticed. When Merkel took over the presidency of the European Council and signed the agreement with Macron, they demonstrated a change in attitude toward the EU that has led to even the frugal countries committing to the EU and the euro, which reduces the latent risk to Europe. So, the European reaction has not been weak, though perhaps more so from a fiscal point of view in certain countries, but has simply been different from that of the US,” he adds.
Matellán notes that advisers are recommending more prudence in portfolios, stating that he “thinks this is reasonable.” However, investors’ profile and how their personal circumstances may have changed must have a greater influence on changing the strategy than the circumstances and movements of the markets.