The time is right to take profits and hold cash until there is greater visibility

Recent market rebounds present an opportunity to lock in gains and build up liquidity while awaiting clearer insight into how the conflict in the Middle East will evolve. This is the opinion of Ismael García Puente, Deputy Director of Investment Strategy at Mapfre AM, which he gave in an interview with Radio Intereconomía. In the current environment of uncertainty, it seems prudent to park these gains in money market funds, which are currently offering attractive yields. In this way, although some short-term return is sacrificed, risk is minimized in what remains a particularly volatile environment.

“It seems to us that the market has run too far ahead, as the situation remains highly unstable in Iran, traffic through the Strait of Hormuz is still very limited, and energy infrastructure in the region has been damaged by between 15% and 20%.”

Although analysts are ruling out a scenario of a long-lasting conflict, Mapfre AM believes that the price of oil will remain high for a prolonged period of time. “We do not expect oil prices to return quickly to pre-war levels of around $60 per barrel,” admits García Puente. “In our central scenario, we would be looking at oil prices in the region of $80–100,” he adds.

The evolution of inflation will depend on what happens in Iran. The market is pricing in a resolution to the conflict in the short term, with an impact on inflation in the near term but not one that is expected to persist. Inflation is forecast at 2.5% for this year, while expectations for next year remain at 2%. That is the analysts’ view, but at Mapfre AM we also like to look at what the market is pricing in. If we look at inflation swaps, we have seen a much stronger movement, with price expectations rising above 3%. The ECB may not wait as long to begin acting, following the lessons learned in 2022.

Technology companies such as ASML still have significant upside potential. Artificial intelligence remains a key technology, although the market’s focus has now shifted to the conflict in Iran. The underlying drivers of this technology remain firmly in place, and companies continue to make decisions to implement and adopt it.