MGP’s focus in the current market environment

Donald Trump's victory in the U.S. elections went down well in the markets, which ticked upwards on the back of proposed pro-growth policies and deregulation. MAPFRE Gestión Patrimonial (MGP), MAPFRE's advisory arm, maintains this optimism "moderately".

"More deregulation and lower taxes have always meant higher growth. The counterweight would come from tariffs, but we’ll have to wait and see how Trump uses them: if he really implements them or if he uses them as a bargaining chip," said Ismael García Puente, head of investments and fund selection at MGP, who adds that the optimism doesn’t extend to European markets, where earnings growth forecasts are lower than in the United States, Japan or emerging markets.

Another counterweight to these measures may be the inflationary component of Trump’s proposed measures, in that he could bring the Federal Reserve’s (Fed) rate cuts to an end. “In the last two weeks, the market has already wiped out two rate cuts in 12 months and is only factoring in two for all of 2025,” he says. “We’ve been arguing for months that the prevailing macro conditions don’t justify so many cuts, so we haven’t changed our perspective much,” he says.

Gold will also feel the effect of Trump's proposed policies if they are implemented. García Puente believes that an adjustment will probably be seen if the Fed decides to change its policy on interest rate cuts or there are fewer cuts than the market expects. “A stronger dollar can also be a stumbling block for the price of gold, so I don’t think we’ll see a year as positive in terms of profitability for gold as we’ve had this year,” he highlights.

Investors will also have to keep an eye on geopolitical tensions in the coming years, especially after the reaction of the markets after Russian President Vladimir Putin approved a nuclear response to attacks by Ukraine on the territory of Russia and Belarus. “Optimism has run rampant after the result of the U.S. elections, which have undoubtedly reduced uncertainty, but there are risks that remain latent. An escalation of the conflict, like we’ve seen this week, is without doubt a bad sign for market optimism and the situation will have to be monitored very closely, although what may in fact happen could be totally unpredictable,” says Garcia Puente.

In this context, MGP is betting on portfolios of core funds in both variable and fixed income. “In the case of variable income funds, we’d bet on global funds with a bias toward the United States and quality companies while waiting to see how Trump’s presidency begins, in case any adjustments need to be made,” he highlights.

As far as fixed income goes, the fund manager splits the portfolio in two: short-term funds or those with a lower sensitivity to interest rates that are showing attractive IRRs and earning returns close to 4% p.a. in euros, and funds that could benefit from an appreciation in bond prices thanks to lower interest rates, i.e. funds with a longer duration and especially in Europe.

Nvidia earnings

Investors have been paying close attention this week as they wait for the results of tech giant Nvidia, which announced on Wednesday at close of trading that it has doubled both its revenue and its profit in the third quarter of the year.

“It’s essential for market optimism to see how Nvidia's results evolve. Very high expectations are already priced in with respect to margins and sales and it’ll be interesting to see what the company says about demand for its new Blackwell chip,” he points out.