Key factors that could guide market behavior in the coming months
The markets remain highly optimistic and expect the strong growth rate seen in previous months to continue. In an interview with Negocios TV, MAPFRE Inversión's Chief Economist, Alberto Matellán, posited that the outlook appears positive ahead of the imminent onset of economic stability, although the risks have increased. Beyond such short-term trends, however, he pointed out that investors are concentrating more on areas where growth "is ultimately translated into business profits," as this is what generates wealth in the long run.
As a result, Matellán highlighted this factor as more important than the actions of the central banks, the latter being "somewhat arbitrary, because they depend more on the decision-making of individuals than on technical concepts. That said, they remain fundamental to European fixed income." Matellán also stressed that stock exchanges may take into account more personal issues linked to society's behavior in the face of the pandemic, though the MAPFRE expert does not believe this to be a particularly major risk.
With relatively high inflation, Matellán noted that the market expects "price levels to remain the same between now and the end of the year." However, he explained that the greatest concern lies in long-term value, which is "still uncertain." With this possible uncertainty in store for the future, he rejected the possibility of inflation spiraling or deflation, "so there won't be any unpleasant surprises." Accordingly, he added that investors "will have to continually adapt their portfolios on a quarterly or semi-annual basis."
In Matellán's view, the apparent pendulum of fixed income and equities appears to be swinging in favor of the latter at present "due to the high level of growth translating into profits, and also due to major changes that have been accelerated by the pandemic, such as technology and sustainability, which favor improvements in productivity." He therefore indicated that equities will be more profitable, though he stressed that fixed income "will continue to play its part and should also be taken into account."