Are investors suffering from altitude sickness?
Some European indices were seeing peak after peak but this week, and particularly this Tuesday, there was a marked drop (2.89 percent in the case of Ibex). Nonetheless, Alberto Matellán, Chief Economist at MAPFRE Inversión views this as “temporary and doesn’t mark any change in the market trend.” It’s certainly true that on ‘gray’ Tuesday (it couldn’t be considered ‘black’) the Bloomberg survey was published, which is one of the most closely followed, with economic forecasts by analysts. A slight drop in growth forecasts was indicated for Europe, down one tenth of a percent to 4.1 percent. Although this is not much, as Matellán points out, it is in contrast to the performance of the US economy and also to the data that were previously being published in Europe.
“I’m concerned about it being properly implemented and the funds being managed well”
In view of this, Matellán recommends private investors “not to get nervous about one-day falls, which are usually just noise.” “There have been very few occasions in history when a one-day movement (in markets) marked a change in the trend,” he stressed. And, if investors are really worried about the headlines they are reading these days, “they should ask their professional advisors what they are doing with their money.”
Although already priced in, Germany has given the green light for the European Recovery Fund. Matellán sees this as positive because it is “one of the best-designed economic plans that the European Union has come up with so far.” That said, the expert noted that the small print needs to be read carefully and, above all, “I’m concerned about it being properly implemented and the funds being managed well, given that expectations are very high in terms of the impact they will have.”
In this environment, the debt markets are calmer, and not even this week’s ECB meeting could cause any fluctuation. “A distinction must be made between US and European markets. The US curve ascended very rapidly in line with growth expectations, so a pause now is normal, and in Europe there is practically no movement and neither is any expected over time.”
“It is normal that most companies that are already trading will continue to provide quarterly data flows”
At the corporate level, companies listed on Spanish regulated markets will no longer be required to report their quarterly results to the National Securities and Exchange Commission (the “CNMV”) from May 3, when the law to promote long-term shareholder involvement enters into effect. In Matellán’s view, the change is of little relevance, “because whether results are published quarterly or bi-annually makes little difference to long-term trends and that’s what investors should care about. And experience tells us that price movements stemming exclusively from the publication of results, which do not reflect the trend, are very short-lived.” “So, it is normal that most companies that are already trading will continue to provide quarterly data flows in the interests of transparency for shareholders, since they already have all the processes in place for that. But as I say, for practical purposes, the difference this makes for investors will be very slight,” he concluded.