Chief economist of MAPFRE Inversión
“Volatility and uncertainty” — two words Alberto Matellán, Chief Economist at MAPFRE Inversión, used to describe the immediate impact of inconclusive results in the US election. This was perhaps the worst case scenario for investors, which is reflected by big swings in the markets. However, in an interview with A Media Sesión on Radio Intereconomía, the expert recognizes that, although this clearly sounds negative, some nuance is necessary: “It’s only temporary.” While it is true that this volatility affects the markets in the short-term, “What should matter to investors is that there is a Government in the US, and that the American system is ready for one in two months.”
In the market, the idea that possible fiscal stimulus programs proposed by the winner will be blocked has begun to be ruled out. However, Matellán disassociates himself from this idea and thinks that if both sides were interested in launching the necessary stimuli in the pre-election period, it would not make sense to put obstacles in the way now. In addition, in his opinion, it would be difficult to justify this obstruction in light of the next elections. “Another matter is that these stimuli come with tax increases, which isn’t really logical.”
So, in this context, what assets provide us with protection from this volatility? According to Matellán, not assets like the yen or US equities, not gold, but rather fixed income, for example, the US two-year bond. “Gold is good for protecting against regulatory uncertainties, which do exist, or excessive money printing, which also exists.”
Meanwhile, the bearish message from the European Central Bank (ECB) last week continues to resonate in Europe. As a consequence, the profitability of the Spanish ten-year bond is reaching one-year lows. “The European bond market is heavily influenced by the ECB. There is a lot of money in the market and now there is also some fear,” he explains.
In Spain, the services PMI was released this week, which stood at 41.4 points, well below the 50 recorded in the eurozone in October. According to the MAPFRE Inversión Chief Economist, this is due to the fact that Spain was hit with the second wave earlier than other European countries. “This is not good news. This is a survey of business purchasing managers, so it is a survey of the real economy. The data reflects a worsening of the economic outlook for the coming months, but this does not rule out a positive 2021.”
As such, Matellán stresses that we should look ahead to 2021. Professional investors, in fact, are already starting to use this time to put everything back together for the following year, “but retailers should not act in response to market noise or political noise.” In fact, Matellán believes that, in this context, there are five key points or questions that small investors must consider: why you are investing; not being in a rush to make money or to make decisions; you should exercise a degree of discipline; you should be critical and skeptical, thinking for yourself; and staying humble so you do not get involved with things you do not understand.