“The German court’s ruling on the ECB changes nothing but invites us to reflect”

 The latest macroeconomic indicators, which confirm the worst financial scenario ever seen, are accompanied by other factors, such as the threat of the German Constitutional Court to the debt purchasing program of the European Central Bank (ECB). As Alberto Matellán, chief economist at MAPFRE Inversión, explains, in an interview with the Radio Intereconomía program “A Media Sesión,” today’s professional investors face the difficulty of having no scenario to provide them with guidance, despite the gradual reopening of some economies. “We don’t know if there’s going to be a recovery, what the final economic impact will be, or what the best way is to reopen the economy.” Which explains his recommendation to “wait and see” how things evolve.

The German Constitutional Court has raised questions about the legality of the Bundesbank’s participation in the ECB’s sovereign-debt purchasing program implemented in 2015, and has affirmed in a new ruling that the action of the EU’s central monetary institution has been disproportionate and should be reviewed. Matellán does not consider this issue to be a problem for investors in the short-term, particularly because it does not affect the current emergency program implemented by the ECB to combat the pandemic. However, the economist points to the need for long-term reflection on two key concepts. The first of these is the ECB’s independence: “This court says that the ECB is not an institution elected by a democratic vote, but is a ‘technocratic’ institution that nevertheless decides on matters affecting governments that have been democratically elected.” The second question is how we are approaching the subject of European construction: “The court affirms that this process has no proportionality. It is warning us that there is something wrong with the way we are trying to build Europe, which is something we all know but that nobody wants to acknowledge.”

This news comes after new macroeconomic data that paint the worst possible international scenario (in relation to industrial orders in Germany, service sector activity in Spain, or the ADP report on private-sector employment in the United States for example). As Matellán has already argued on other occasions, this scenario is already priced in, and investors believe that indicators will continue in the same vein for at least one more quarter. “The key moment will come in the third quarter, when we’ll see if things are going to carry on like this or if the recovery expected by the market gets under way,” he adds.

As always, Matellán advises caution when deciding where to invest. It is true that some sectors, such as health and technology, are performing very well. However, “if we are long-term investors, and I think that should be the case for all small savers, I don’t think this is the right time to change. At MAPFRE we are very conservative and we pass on the same message to investors. We don’t believe this is the time to let yourself be carried away by opportunism.” He also adds that, before considering where to spend your savings, “it is better to reflect on what your investment objectives are and what your time-frame is.” “Investments should only be considered on this basis, and the best solution is to seek help from a professional advisor,” concludes the MAPFRE Inversión specialist.