With the market paying more attention to economic recovery, equities appear to have entered into a process of consolidation. Alberto Matellán, Chief Economist at MAPFRE Inversión, pointed to a change in the stock market narrative: “Until a month and a half ago, the narrative was growth, which explains why the stock market was on the rise. Now, however, the narrative is rooted in inflation worries; this can both impede and represent a danger to stock markets.” Therefore, in his opinion, when inflation is no longer the subject of market debate, “The stock market has to reappraise a more favorable outlook for growth.”
From the European perspective, and alluding to possible changes in monetary policies, the ECB stated that it was still too early to start withdrawing monetary stimulus. In this sense, the economist stated that it should be healthy to kick off the debate by discussing possible courses of action for the future. With central banks’ theoretical objective of controlling inflation, he felt that if the stimulus were to be withdrawn ipso facto, “A fear may arise that would warrant a market decline.” In his opinion, therefore, “Withdrawal must be gradual and measured.”
“That real estate markets were very isolated, largely influenced by structural differences in urban areas”
Across the pond, it seems the Fed is driving a change of direction since “They are at a later stage in the cycle, the inflation debate over there is further along, and they have experience in stimulus withdrawal.” The expert therefore considered it normal for them to lead the way for other central banks: “A healthy economy is an economy that does not depend on stimulus.”
Along the same lines, Matellán explained that elevated real estate prices were one of the consequences of the ailing economy. “With so much stimulus, we are essentially inflating assets, and this hike is not always justified by market need.” However, he clarified that real estate markets were very isolated, largely influenced by structural differences in urban areas.
The expert suggested that gold was a good safe-haven asset in light of money’s fall in value, although he added that there were other alternatives that retail investors should consider. In particular, gold does not serve as a safe haven against everything; there are more liquid security assets or assets that provide better protection against volatility. He also reminded private investors of the importance of diversifying portfolios by holding assets that move differently from one another to offset potential losses.
Ultimately, and after previously recommending updating portfolios in line with inflation, Matellán stressed private investors’ longer-term objectives: “When we set objectives, we need to keep the family unit in mind when it comes to planning for the future.”