Optimism in the market will continue in the short term, but there is uncertainty about 2022
Growth expectations are being lowered considerably, but still remain high. “PMIs have fallen, but they are not sinking; growth will continue to be strong, ”says Alberto Matellán, chief economist at MAPFRE Inversión, on the Radio Intereconomía program A Media Sesión. On the other hand, companies are doing a good job of handling, at least for now, the tensions in the supply chains, as demonstrated by “relatively strong results.” Furthermore, despite the gradual withdrawal of stimulus measures by central banks, which has already been announced, there is still a significant amount of support, "and in October, liquidity injections increased again after being reduced in September".” This “cocktail” has caused stocks to hit new highs, mainly in the United States.
But will this winning streak continue in the markets? “Yes, in the short term,” says the chief economist at MAPFRE Inversión. But in the longer term, heading into 2022, Matellán is less optimistic “because expectations can change considerably.” Precisely, these greater uncertainties about growth are putting central banks between a rock and a hard place, with key meetings this week for both the U.S. Federal Reserve and the Bank of England. “Beyond the messages transmitted at these meetings, it's important to analyze these institutions' outlook on inflation and growth, because that will determine their future actions,” says Matellán.
When corporate earnings season is in full swing, there are always concerns. This week, in fact, saw a setback with some profit warnings from renewable energy companies. The MAPFRE expert does not believe that their stock market potential has run out, but it should be noted that this sector has different characteristics from other “utilities”: “Renewable energies are a more volatile sector, since it's not as mature as the rest of the utilities sector. In addition, inflation is showing us that green energy is far more expensive than we had thought. That's why these movements are taking place,” he adds.
In this context, professional investors are remaining cautious, not out of pessimism, but until the central banks clarify their next movements. For retail investors, Matellán advises not to get carried away by the market noise and to simply “make sure that your advisor, along with the management companies they work with, are doing a good job.”