“The margin for negative developments is small and there is a lot of liquidity supporting prices”

In addition to that institution’s forecasts, we now have inflation data. In September, the CPI in Spain was in negative territory (-0.4 percent) for the sixth consecutive time. In the short-term, the economist believes that there are still factors that will continue to exert downward pressure on the CPI in Europe, such as rising unemployment rates. But in the long-term, forces will appear that will introduce both downward and upward pressure. In addition to unemployment, high levels of debt and changing consumption patterns will exert downward pressure, while there will also be upward pressure as a result of the massive amount of money that has been injected and fiscal stimuli. “So, we have to wait and see whether or not that money translates into higher consumption“, explained Matellán.

For its part, the European Banking Authority (EBA) warned that banks will have to pay their clients for mortgages with negative interest rates after the differential is added, unless there is a legal restriction on this. According to Matellán, this would already be accounted for in the price, except in certain specific cases. But he prefers to stick with the idea: “An environment where rates are negative and curves are flat will put an end to traditional banking. That said, banks across Europe are reinventing themselves, seeking alternative sources of revenue through services with added value. And there may therefore be winners.”

Within the banking sector, several US institutions are updating their accounts, such as Goldman Sachs, Wells Fargo and Bank of America. Matellán doesn’t believe that will be a determining factor in changing the trend in the market either. “Now the focus is more on macroeconomic data and the discussion around monetary and fiscal stimuli. They will, though, be an indicator of the impact of the pandemic.” Meanwhile, the race to the White House continues and the first polls have been published. The economist understands that this type of news creates volatility, “but it doesn’t change the fundamentals.” “Recent history has shown that anything can happen unless there is a huge difference between the candidates. But the truth is that their economic policies hardly differ. Both are counting on stimuli, albeit allocated differently, but the general idea is virtually the same. Moreover, monetary policy is independent in theory, and that is what is moving the market. As such, we expect the impact to be small in the long-term.”

Against this backdrop, and also bearing in mind that China is pressing ahead with its plans to open up its economy, Matellán recommends that private investors not be pessimistic. “Investment goals must be based on vital requirements, and it’s worth remembering that markets move because of global trends, not local factors. So we must be prudent without being overly defensive. The important thing is for clients to tell us what their goals are and to trust us.”