The market isn't ready for the central banks to raise rates
At the end of 2021, analysts started to predict that the inflation trend would be more than transitory. These fears have fueled rumors that the central banks, especially the Fed, will move faster to raise rates and withdraw stimulus. Daniel Sancho, head of investments at MGP, believes “the market isn't ready” for these rumored measures, which have sent stocks tumbling for several sessions now.
What is the situation in the markets? On the talk show “Ponte en Acción” on Negocios TV, the expert said that “some indexes are already seeing the writing on the wall” and assuming that current inflation is here to stay. What we don't know is how long: “The next few months will be important, because after last year’s base effect, we’ll have more information on whether the problem is due merely to the economy reopening or to other variables,” he explained.
Investors believe the equity markets have yet to digest inflationary pressures. However, MGP’s head of investments said that companies are showing marked differences. On the growth side, "some companies are earning profits and maintaining healthy balance sheets, while others are winning based on expectations, and their valuations may be impacted by the current situation." In the value sector, there are "fantastic firms that have been undervalued by the market for years, and they are really worth much more,” he pointed out.
Although analysts are now seeing corrections in the market, Daniel Sancho believes that “this is healthy and something that we must accept.” So, what should individual investors do? In this context, the expert encourages them to “understand the term of their investments and seek opportunities in these corrections by relying on an advisor to actively manage them.”