“The market is now going in the direction investors are expecting or even hoping for”

Pessimism among investors has turned into elation in the wake of some momentous events: the US elections and the progress made with a vaccine. According to Alberto Matellán, Chief Economist at MAPFRE Inversión, in an interview with the A Media Sesión show on Radio Intereconomía, “the market is now going in the direction investors are expecting or even hoping for.” Now, he adds, “investors have gone from focusing only on the damage caused by the health crisis to predicting that the pandemic will end in the near future, in 18 months or 2 years.”

This does not mean, however, that they will not be keeping an eye out for any macroeconomic data that may leave them disappointed. One example of this is the retail sales data released this week in the United States, which was worse than expected and shows that consumption is a long way from recovery. According to Matellán, “unless there is another crash, the upward trend in the markets should continue,” but he reminds us that data like this may cause some adjustment as it can serve to remind investors that the pandemic may have a bigger impact on the US economy. He also reminds us that these market movements “are magnified by the role of passive management.”

Though this situation has improved, it is still precarious and the central banks will continue to provide support. The MAPFRE Inversión economist believes, in fact, that the ECB will return to the fray in December, when it revises its macroeconomic forecasts. However, there is not much more that can be done in terms of monetary policy; as he explains, “central banks play a fundamental role, because they inject liquidity into mechanisms that make it possible for this liquidity to penetrate all economic and financial areas. This has already been done on an unprecedented scale and there is little else they can do. Now it is up to fiscal policies — in other words, governments.”

On a national level, bank mergers have boosted the sector. For Matellán, buying a share of a company because it is about to merge “is a mistake” because it is possible that this merger might not actually happen “or because the company created by the merger will not necessarily be more profitable just because it is bigger.” That said, this change in investors’ perceptions of the pandemic, which has led to an improvement in economic forecasts, has also led to a change in perception toward the financial sector, since there will be, for example, minor defaults.

The tourism sector, which has been one of the most severely hit sectors, is also performing better. Matellán believes that now may be a good opportunity to enter this sector, but that it’s crucial to bear in mind that there will be winners and losers. “It’s important to have good managers who can choose companies that know how to adapt to changes in customer habits as a result of the pandemic.”

Finally, and as is customary in his weekly slot, Matellán offered a series of recommendations for individual investors. “The year is almost over and it’s time to consider personal strategies that are not dependent on market movements,” says Matellán. “You don’t make money by buying and selling, but by investing and making sure that investment works for you. If you are following the market 24 hours a day, you’re the one doing the work and you’re probably not getting much back,” he explains. “No investment decisions should be made in a matter of hours or days,” he concludes.