Is the looming threat of a fall in the markets a healthy correction or a trend pivot?

This week, the world's major stock markets have seen days of heavy selling, mainly driven by doubts about high valuations in the technology sector and the Fed's less favourable stance on interest rate cuts in the short term. But these slight declines are a ‘healthy’ adjustment after recent gains, according to Alberto Matellán, General Manager of La Financière Responsable.

‘We've had a very good year and it's completely reasonable,’ says Matellán, who does not see any cause for concern in the factors that appear to be slowing down the market. First, the US economy does not require further rate cuts, and in the case of the big tech companies, we are in the middle of earnings season and the results are not negative.

In statements on Wednesday, prior to the presentation of Nvidia's results, Matellán explained that the giant's accounts can serve as a reference for the market, not only for the company itself, but also for the information they provide on the sector as a whole and the pull of AI. If the data disappoints, there could be sales in the short term, although the impact would be limited.

The technology sector, in general, is showing strength that contrasts with previous periods of technological booms, because valuations are now based on real profits and not just expectations. However, the huge investments being made by these companies will have to prove their productivity in order to sustain the high valuations, the executive argues.

Fed: no hurry to cut rates

The minutes of the US Federal Reserve, which will be released this week, may reflect internal differences on monetary policy, a debate that Matellán sees no problem with. His opinion is that the US macroeconomy does not currently require a further rate cut, a position that would be justified by the risks but not by the data itself, and would therefore be premature, especially with inflation ‘continuing to cause concern’.

In addition, there is a growing fear that President Donald Trump's lower approval ratings will prompt him to increase public spending and thus inflation, but Matellán downplays this possibility, as other more significant inflationary risks persist: tariffs and structural changes in international trade, and the ‘monetary flood’ of previous years, which we are seeing again today to a lesser extent.

Following the reopening of the US government, the employment report will be published again, which could show signs of weakness, but the market has already discounted this. The data will be closely analysed, says Matellán, who also invites us to look at the small print. The Fed does not only look at employment figures, but also at others such as wages, as their rise fuels inflation.

In Europe, inflation stood at 2.1% in October, very close to the European Central Bank's target, but Alberto Matellán warns that this figure is ‘unrepresentative’ due to the disparity between countries: while in Spain prices have risen by 3.2%, higher than desirable but explained by economic growth, in France the figure is around 1% due to the weakness of its economy. All this leads Matellán to consider inflation a risk that cannot be overlooked in the Old Continent.

Finally, when asked about the fall in bitcoin from its highs, Matellán explains that it is difficult to assess because it is not an asset as such, ‘there is nothing behind it’, and its price depends on sentiment and capital flows. The recent falls could indicate that investor sentiment ‘has turned around’, but its extremely high volatility makes it premature to draw any further conclusions.