Stock markets continue to be bullish to the extent that some indices, such as IBEX 35, have recorded their best month ever with positive balances close to 26 percent. Many sectors, including those hardest hit by the Covid crisis, have recovered many of the losses they accumulated during the year. What has changed to back up this new trend? In an interview with Radio Intereconomía, Alberto Matellán, Chief Economist at MAPFRE Inversión, points out three factors: first, a change in investor mindset, which has led to a shift from investing in pandemic mode to investing in post-pandemic mode — in other words, “thinking about a future economy that will no longer be weighed down by this burden.” Secondly, he points to the excessive liquidity on the market, saying that “The new liquidity that has arisen places it at the same levels as in March or April;” and, finally, he highlights finding that “the impact of the second wave will be lesser than expected.”
Therefore, once the pandemic has passed, “Our economy will have a new structure and strong fiscal stimuli that, due to coming later than expected, will mean this upward trend should continue,” he adds. However, the Economist warns that there is a risk that must begin to be assessed: “There has been a change in the monetary base since, where before there was one euro, now there is two, and this could lead to problems in the future.”
That optimism about the bounce back in activity, however, is greater in some countries than in others. This week, according to the OECD, Spain will be the economy hardest hit by the coronavirus crisis of its 37 members, with GDP plummeting 11.6 percent this year. The body’s forecasts indicate that there will not be a complete recovery and that it will take place gradually. It highlights that the Spanish economy will not exceed pre-crisis levels until 2023. Matellán explains that the estimated 11.6 percent decline has already occurred for the most part and that the important thing now “is to see what will happen from here.” He recalls that the productive structure of the Spanish economy is more sensitive due to its sectoral composition and the size of the companies within it, mostly SMEs. It also has greater involvement in social activities compared to other European countries. However, Matellán emphasizes that, unlike in other countries, Spain reacted less strongly in the amount earmarked from a fiscal point of view and the way in which that aid was structured. “Looking at the economists’ consensus, the forecast for Spain is above the European average, so it is not so bad. Although there is a burden, which may be fiscal policy. And when the rest of the world sets out highly expansionary policies, Spain remains unclear on the budget and there is talk of tax increases.”
In this generally more optimistic environment, it is time to readjust portfolios, according to Matellán: “What happened in November is very illustrative. The most affected sectors, such as airlines, have rallied the most. Those that had improved a lot, such as tech companies, have now fallen, albeit by a little; 5 percent or 10 percent. Professionals usually adjust portfolios in January, not December, due to a ‘photo effect’ that takes place on December 31. However, we should position ourselves for this more positive environment, an environment based more around the post-pandemic world.” Another issue centers around the private investor: “Private investors should take time over the holiday season to reflect and then sit down with their advisors to adjust their investment strategies.”
In this sense, for this type of non-professional investor, Matellán offers a new recommendation: “Be skeptical, take a critical approach.” Often, he explains, the most effective investment strategies are the most boring. And it is the one that private investors should avoid investing in because “If this is difficult for professionals, it is much more so for private investors.” This is why having a good manager or a good advisor is key.