Chief economist of MAPFRE Inversión
Euphoria has returned to the markets with dizzying upturns across the major global indices. The media outlets are all agreed on one point: the reason for this change in trend is Biden’s victory in the US and progress with the vaccine. But Alberto Matellán, Chief Economist at MAPFRE Inversión, wants to go further. In an interview with Radio Intereconomía’s A Media Sesión program, he recognizes that “the undercurrent of the market has changed, as have the fundamentals.” But, in his view, this new sentiment was not produced by the vaccine itself, rather this “news is reminding investors that there’s a world after Covid.” “In a few years we’ll have either forgotten [about Covid] or learned to live with it as we do other illnesses”, he adds.
Along with the vaccine, the Democratic victory has been welcomed by most of the international community. “The mere occurrence of elections has a positive impact because they reduce uncertainty and are followed by a sense of calm,” explains Matellán. But the expert also views the fact that the chambers are divided, particularly the Senate, as a positive “because this will not lead to extreme and potentially harmful economic proposals.”
These movements on the stock exchanges have produced a degree of money rotation; it has moved out of the stocks that performed best during the year into others that could come at knockdown prices. “This year, investors have been focusing on the stocks that have benefited the most from the pandemic, so as a degree of normality returns, this balances out,” says Matellán, who hopes this trend will continue. However, he warns against investing in stocks at knockdown prices because “if they are trading at those prices, it’s for a reason. Sometimes the market is wrong and this creates opportunities, but other times it is not.”
One of the sectors that more money is flowing into is banking, which has been particularly punished during the last few months. Matellán explains that default expectations have lowered as the economic outlook has improved. Interest rate expectations have also improved, which directly affects business. But, in the economist’s opinion “that doesn’t mean that banks don’t have to reinvent themselves and change their top-down models.”
Against this backdrop, investors may feel tempted to use any means to benefit from this stock market rally. But Matellán recalls that, as investors, they need to ask themselves why they’re investing and, in his view, betting or ‘playing the market’ should not be considered a good enough answer. “It’s important that it’s a decision conducive to a good night’s sleep and aligned with your personal priorities. investing shouldn’t be an end in itself; it should be a means to achieving other things, like retirement, your children’s education and so on,” he concludes.