Is a storm brewing in the stock exchanges?
The ghosts of inflation have returned, and the gradual removal of stimulus by central banks is coming closer with the skyrocketing public debt. Nonetheless, the Ibex 35 continues to keep its composure, and all indications point to this year being one of recovery, not only at the macroeconomic level, but also in finance. Daniel Sancho, head of investments at MAPFRE Wealth Management (MGP), had a discussion with Gonzalo Lardiés, senior manager of variable annuity, Europe, regarding these and other topics in the latest episode of “Ponte en Acción” on Negocios TV, one of the leading economics channels in Spain.
Sancho acknowledged that for months we have seen greater than expected returns. That is why he noted that “sometimes a storm is good to remind us that we are investing in volatile markets.” “Getting soaked occasionally isn’t bad so that we don’t forget,” he stated.
But, after these increases in the stock exchanges, are there still opportunities? At present, according to the MGP expert, with Lardiés in agreement, diversified portfolios have become particularly important. “When our clients ask us when we invest, we tell them the best time was yesterday. When you get involved in variable annuity, you must be aware of where you’re investing. There are always expensive and cheap companies. There are always opportunities. But in the current context, we are valuing active management even more,” he added.
Wealth managers have faced a new landscape. “At university, they did not teach us anything about negative rates,” Sancho recalled. And that is why the first thing we have to do is properly convey or properly understand “the client’s investment timeline.” And he alerted about fixed yields, because in reality they are not fixed. “You can lose a considerable amount of money, and we have to try to convey this to prudent clients,” Sancho explained.
This is in addition to the possibility that the old ghosts of inflation could reappear. Although Sancho expects that the central banks are not mistaken and that, truly, “it continues to be something temporary.” “Central banks are between a rock and a hard place. The debt has taken an enormous leap with the pandemic. We have elevated deficits. So let’s hope that it’s something temporary, but there are forces in the market that weren’t there before,” Lardiés concluded.
To see the full video of this discussion between these two experts, click here https://www.youtube.com/watch?v=dWhR03zrSlE&list=PL-j1qqL5tzpfTgtkIuzASyvpwL8VBIuc8&index=16