Ismael García Puente
Investment manager and fund selector
Optimism remains in the markets. At times, however, as was the case last week, investors took a break and reaped profits. In an interview with Radio Intereconomía, Ismael García Puente, an investment manager and fund selector at MGP (MAPFRE Gestión Patrimonial — MAPFRE Asset Management), explained three factors that explain this optimism. First, macroeconomic data are relatively positive, with exceptions such as the eurozone’s composite PMI, which remains below 50 points. Second, liquidity remains abundant, and central banks are expected to continue to pursue this ultra-easy monetary policy. Lastly, it is also justified because of the valuations. In this sense, while some sectors have high valuations, others include the companies hardest hit by the crisis and have the best profit forecasts for the next 12 months. It is logical, therefore, that we are seeing market rotation.
In this environment, MGP acknowledges that it is applying “a portfolio shift toward cyclical assets.” For fixed income, however, he recommends a more flexible approach. “The situation is complicated. We don’t have a clear vision of what’s happening with rates at the global level,” the fund selector added.
On the monetary policy front, China itself warned that the Fed and ECB policies of economic stimulus could generate very dangerous bubbles. This led to correction in some markets. The MGP expert believes that what Chinese economists really may worry about is that “the Fed and ECB policies keep their currencies weak against the yuan, and that, in the long run, they trigger an inflation spike in the US that results in a capital outflow from China, as already occurred in August 2015.”
In Spain, unemployment data were not very encouraging, since the number of employed people exceeded four million due to the devastation caused by the third wave of the pandemic. Still, García Puente tried to look on the bright side of the data, considering its temporary nature. “This (temporary nature) can be an advantage if we get a majority of those employees to return to their jobs when activity recovers, as has happened in the United States.” The problem, he pointed out, was structural unemployment. In this regard, this is supported by MAPFRE Economics forecasts: MAPFRE Economics projects an unemployment rate of 16 percent and it could increase if there is a greater destruction of SMEs than expected, and if the confidence of entrepreneurs continues to deteriorate.
The forecasts for Spain’s GDP were not very flattering either, as indicated by AIReF (Autoridad Independiente de Responsabilidad Fiscal — the Independent Authority for Fiscal Responsibility). MAPFRE Economics projects a contraction of 5.3 percent in the first quarter compared to the first quarter last year. However, its estimates for the year as a whole remain positive, with a rebound of more than 6 percent given the acceleration that will occur in both the third and fourth quarters “once the vaccination process reaches cruising speed.”