FINANCE | 12.05.2021

“The important thing is not the data itself, but the upward trend in inflation”

Redacción MAPFRE

After the high levels reached this year, the market is anticipating the possibility of companies’ values beginning to fall.

With equity entering a consolidation phase, Ismael García Puente, fund selector for MAPFRE Asset Management, believes the sentiment is optimistic. “Our concern throughout the first few months of the year was whether companies’ results would support the growth path. And with that in mind, we are seeing the best results for a first quarter.” However, he explained that as the year progresses, “macro readings and markets will start to relax.”

“Gold has worked well as a raw material in inflationary periods but what needs to be well-monitored is the dollar”

Looking at the United States, the expert confirmed that the following CPI (Consumer Price Index) data may have a strong impact on markets if inflation is too high. “Investors have long bought the idea of inflation being above 2 percent,” he added, while clarifying that the important thing is not the concrete data but “the upward trend in the price level.”

In this sense, with inflation levels above pre-pandemic levels, the dollar faces the challenge of “regaining lost ground against the euro over the past year.” Nevertheless, García Puente estimates that if interest rates do not rise again in the US, the US currency will continue on its downward path with respect to the euro, which currently stands above 1.21 dollars, after rising by 3 percent in the last month and a half. Likewise, the fund selector gives little importance to gold, despite a possible commodities supercycle that, after years of low prices, has been picking up since last year. “Gold has worked well as a raw material in inflationary periods but what needs to be well-monitored is the dollar,” he argued.

With regard to the macroeconomic outlook, and in hand with inflation figures, the recent update from Brussels on growth forecasts for Spain points to a rise in GDP of 5.9 percent for this year and 6.8 percent for next year. According to the expert, “our forecasts are somewhat less optimistic than those of the European Commission. But it’s not because we don’t trust in the Recovery Plan: It takes time for funds to reach countries and for the European economy to begin to feel the multiplicative effect of aid.”

During a time that is “more alpha than beta,” and after more than half a year of growth, García Puente ultimately believes that it is time to start analyzing “which companies can emerge stronger from the crisis.” Thus, he argues that in this climate of economic recovery, private investors should bet on more “diversified and varied portfolios,” as well as maintain a short-term investment—around two years—given that it is the timeframe most anchored to the rates of the central banks.