Chief economist of MAPFRE Inversión
“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” This Mark Twain quote perfectly captures the complexity of financial markets and the difficult role of financial advisors. But private investors can always follow guidelines to help them make better decisions, at least.
In recent weeks, Alberto Matellán, Chief Economist at MAPFRE Inversión, has been providing a series of tips for non-professional investors. All of his advice points to one thing: “Investing with common sense,” he explained in an interview with Radio Intereconomía’s A Media Sesión program. The expert highlighted that you must ask yourself why you are investing — what is your motivation for doing so? Once you have an answer, act quickly, “since no investment decision should take days or even hours to make.” However, we must “be disciplined, think critically and invest humbly so we don’t get involved with things we don’t understand.”
These are valuable tips for handling the current stock market situation. Financial markets have experienced a real year-end rally, which has offset a significant proportion of the losses accumulated since the beginning of the pandemic. And this more positive scenario looks set to continue over the next year. “There is a cocktail of factors behind this: better-than-expected macroeconomic data; investors’ confidence that the pandemic will end sometime next year; and the immense liquidity that is abundant in the market,” explained Matellán. However, this comes with the warning that although everything looks pretty good for next year, there will be risks, such as those related to the current excess liquidity.
Perception has improved so much that even Wall Street’s highs could be maintained. “They [the highs] can be maintained as long as contributing factors persist. So what are the risks? The most immediate is an unexpected pandemic wave early next year, which seems less likely, or disappointing macro data, which is a possibility,” he explained. He added that one point of interest will be how economic growth, which is estimated at levels above 5 percent, is translated into earnings per share. “We could see profit growth above 20 percent, which would be very positive for global stock markets,” he added.
On this side of the Atlantic, experts are in agreement that we can expect growth of about 6 percent in Spain and 4.6 percent in the eurozone as a whole. As Matellán explained, the new restrictions obviously do not help, but he focused on the positive: “The economy ends up adapting to these situations and this is one of our greatest assets.” He believes that it is important to wait and see what happens from February or March before drawing further conclusions on the effects on the economy.
Meanwhile, foreign exchange market movements continue, triggered by movement coordinated between the Fed and the US Treasury following the appointment of Janet Yellen. “The Fed is being very aggressive. It is injecting money on a large scale and is supported by the Treasury. They are working together to flood the American and global economy with dollars,” he concluded.