“The effects of the second round can already be felt in the industry and services”
The core discussion on the markets has taken a turn that investors weren't expecting and that is now weighing heavily on many indexes that had been close to all-time highs. With a more negative sentiment than in recent weeks, MGP Investment Manager and Fund Selector Ismael García Puente told Radio Intereconomía that the signs of risk that the market feared are making their presence felt: “Inflation and its second round effects are being felt in the industry and services.”
This concern has also reached the central banks, which, in light of the spike in prices, are studying possible measures that analysts are trying to anticipate. In fact, the Bank of England, despite registering a lower level of inflation than the United States or the European Union itself, will be the first of many to undertake adjustment measures, “becoming the first bank that raises interest rates.” Still, the investment manager believes that the rise on inflation have more to do with “the country's structural problems in the wake of Brexit.”
For now, the initial stage of the results campaign does not seem to be affecting the stock markets, although he admits that these initial figures are “moderately positive,” especially in the banking sector. From his position, he confesses that now is the time to pay more attention to margins, especially in companies that are unable to alter their prices to correct for problems in supply chains or in bottlenecks, among others.
Finally, he believes relaxing the monetary stimulus measures could lead to greater volatility and new corrections on the market that have not yet been seen. So, he recommends “caution and portfolio diversification in this convulsive context.”