How to invest with the stock market at maximums?
Redacción Mapfre
A review of the recent rally in the markets
The global financial markets are experiencing a sweet moment. After the doubts that followed Trump's first months in power and his trade offensives, profits have become widespread across stock markets: Wall Street has been breaking its historical highs in its main indices for weeks, the IBEX 35 is recovering levels prior to the 2008 crisis, Europe is benefiting from tailwinds, and the Eurostoxx is at its highest recorded levels, to name a few.
Not only have shares benefited from this trend. In the debt market, the IRR (annualized yield) of short-term government bonds has fallen across the board (60 bps in the US, 15 bps in Spain, and 6 bps in Germany). Credit spreads continue to decline relative to their historical average, and gold has surpassed $3,000/oz, now moving toward the $4,000 threshold.
Among the factors driving this boom are macroeconomic conditions—with more positive prospects than those expected a few months ago—the anticipation of rate cuts by the Fed, the resilience shown by corporate earnings, and optimism about AI’s potential in business, according to MAPFRE Inversión.
On the contrary, among the risks that are emerging on the economic horizon are doubts about the effectiveness of fiscal stimulus in Germany, the fiscal imbalance in France, and the possible impact of tariffs on the U.S. economy that economists continue to warn about.
Is it a bad time to invest? Not with the right strategy
We are facing a high price scenario, in which questions for investors arise: Should one enter a market that is already “expensive,” or wait? Should you hold your investments, or is it time to sell? MAPFRE experts explain that being in a moment when stock markets are at record highs should not deter investment if we have a long-term outlook—the most suitable for retail investors—and good diversification.
This strategy will help cushion the impact on our portfolios from downturns, which will inevitably arrive at some point. But what historical trends show, if we zoom out, is that a patient investor will ultimately reap gains by avoiding a short-term focus.
“What needs to be understood is that the maximums do not have to be interpreted as an exit signal but rather as an opportunity to review the strategy and confirm that it is aligned with our time horizon and risk profile,” states Ignacio Amo López, fund selector at MAPFRE Inversión.
Three keys for investing safely
The MAPFRE Inversión team highlights three elements that are essential for developing a good investment strategy, even though we find ourselves in a time of upward market signs.
- Thinking in the long term
“History shows that, despite phases of volatility, different financial assets tend to offer positive returns over broad time horizons,” explains Javier de Berenguer, fund selector at MAPFRE Inversión. It is certain that at some point stock market rallies will be followed by corrections or profit-taking. However, beyond these temporary swings, it is highly likely that over a reasonable time frame the investor will have seen their savings appreciate in value.
- Portfolio diversification
An optimized investment strategy must combine different assets and funds, so that they remain resilient regardless of the economic cycle. Focusing too heavily on a single sector or asset—for example, to take advantage of a boom that is cyclical in nature—carries the risk of sharp losses. By contrast, spreading investments is the best way to protect against volatility.
- Financial advice
Good professional support provides discipline and consistency, and helps to avoid precipitous decisions that can hinder profitability for years. It is also the best support for developing a realistic plan and putting it into action to achieve your goals.
