"It is important for investors to be content with the composition of their portfolios"

Equity markets have managed to rise after the sharp declines seen in 2022, and are now trading in a more sideways drift, which is what we observe when prices don’t move decidedly either up or down and stay within a stable range for a certain period of time.

“Looking ahead to the next few weeks, it looks like the sideways drift will continue, because a change would have to be driven by some external momentum that can cause the market to move,” explained Alberto Matellán, chief economist at MAPFRE Inversión, who stressed that the shift could occur if there were a change in discourse by central banks or if macroeconomic data worsened.

Matellán believes that, at the moment, no change is expected in current central bank messaging “because there are no macroeconomic or microeconomic reasons” for doing so. Such a change could come later, coinciding with the Jackson Hole meeting.

There could also be a change in the market trend due to macroeconomic data, although the chief economist at MAPFRE Inversión doesn’t regard that as a foregone conclusion either. "Certain variables change very slowly, so you don't see as many short-term variations. That's a good thing, because trading volume always shrinks in the summer, which means any movement is magnified, "he says.

In this situation, he considers it important for investors “to sleep well” and that they are happy with the composition of their portfolios, so it’s important that their financial advisors ensure that none of the assets they have positions in give them restless nights.

Another round of corporate earnings calls beckons, and Matellán anticipates that the results will probably be somewhat worse than those of the previous quarter but doesn’t believe they’ll be as bad as the market consensus appears to be expecting. “What’s happened is of much less importance than what’s going to happen in the coming months,” he recalls.

 

The resistance of core inflation

Inflation seems to be moderating, as per the latest data published in both Europe and the United States, although the underlying rate seems to be showing greater resistance in Europe.

Matellán recalls that central banks have less control over inflation than they think, as prices are the result of market dynamics. However, he’s not ruling out any additional rate rises in the eurozone to try to reduce core inflation, which has moderated more rapidly in the United States.