Market unknowns for this year

Jan 12, 2022

Redacción Mapfre

Redacción Mapfre

2021 is now history. After one of the best years in stock market history, investors fear that the markets may have peaked. All signs would suggest that there will continue to be unresolved battles for this year, many of them associated with the pandemic and the situation with the new variants. To start with, inflation fueled by the current energy crisis, which seems not to have come to an end, remains one of the main concerns of central banks. Alberto Matellán, chief economist at MAPFRE Inversión, believes that we could be peaking in the Eurozone, but not in Spain, which seems to be “a few months behind”: “If we’re seeing the peak now in Europe, we may see it later in our country.” However, he states in an interview on Radio Intereconomía that we will not see “a double-digit CPI.”

One of the drivers of higher price levels continues to be the energy sector, and more specifically OPEC, which seems to have gained some power in recent months. Analysts note that the latest rises in the price of crude oil will, however, have a shorter run. “Economic growth in the United States and China and global demand are limiting these rises,” the expert noted.

Inflation continues to worry central banks. On the American side, after the Fed’s last meeting at which they announced a possible early rate hike in March, the stock markets are preparing for a few months of sudden shifts. In the economist's opinion, we will see ups and downs at the beginning of the year “because we have to stabilize the scenario for this year.”

Here, Daniel Sancho, head of investments at MAPFRE Gestión Patrimonial (MGP), finds the performance of tech companies to be interesting. Apple, for instance, has just reached a market value of three trillion dollars. The NASDAQ, the stock market benchmark for the big tech sector, gained 20% over the previous year. Although it was strengthened by the good performance of “the big five companies in the selective index.” “Without them, the index would have been down by about 20%.”

The ECB has struck a more cautious tone and, unlike the U.S. central bank, is dealing with factors of a more political nature. Even so, he estimates that there could be some changes “influenced by the United States, but the road map will remain the same.” In the eurozone, the latest PMI data, with its worst figures in nine months, has highlighted the possibility of a downward revision in growth forecasts for the coming months. However, Alberto Matellán noted that “we are in months of adjustments” and that “although the figures are down, they’re still good.”

In the current context, experts remind individual investors of the importance of reviewing one’s goals and the need for a financial advisor. For Daniel Sancho, this year could be a good opportunity for active management and, given “the difficulty of predicting when the market will correct or not,” he recommends taking account of the investment term, “with a long-term view.” For his part, Alberto Matellán believes that investors' biases are shifting more towards stock markets, which means greater risk. Even so, he clarified that, although “the profitability in fixed income is low, it doesn’t mean that a retail investor won’t have this type of stabilizing asset.” But such a decision does not depend solely on the investor profile: this economist believes that the composition of the portfolio should vary according to one’s savings objectives and the previous portfolio.

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Bond yields: a sign of changing expectations

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Debt markets appear to have started the year with returns not seen since before the pandemic. According to Alberto Matellán, chief economist at MAPFRE Inversión, all this is the result of a change in expectations.

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