Experts anticipate moves in stock markets after the summer in an environment of slowdown and rising interest rates
A difficult summer that gives way to an uncertain autumn. This is the general sentiment of investors, who face a return to stock market school with the challenge of adjusting their portfolios to a new environment characterized by high inflation and widespread interest rate hikes. The Ibex-35 is saying goodbye to the summer period with a 10% drop from early June to last Friday and the red numbers have fallen to 7.8% so far this year.
It is true that the Spanish stock market has outperformed other major international markets, with accumulated losses of about 20% in Italy, Germany or some Wall Street indices. But the tension in the national stock market is more than palpable, much more so after a few days in which central banks have made it clear that the fight against price escalation remains a priority, even if it means stunting growth or even “causing pain”. » to families, as recognized by US Federal Reserve (Fed) President Jerome Powell at the latest central bankers meeting in Jackson Hole This week the European Central Bank (ECB) approved the largest single rate hike in its history turn right: 0.75 points, bringing the official price of money to 1.25% Fighting inflation is exceeding growing recession expectations.
Now it’s time to get back to the days left over in September, a traditionally negative month for the market. But experts agree that there are still opportunities to take positions again. Especially after the recent correction that reversed the summer’s upward path. “There are only two important things to keep an eye on right now: the entry levels in the market and the possibility of a recession,” they say from Bankinter’s analysis department.
The central scenario used by the company is that the Ibex-35 will end the year at 8,200 points. That is, more or less at the current level. But it is foreseeable that these levels will be revised downwards as macro and central banks continue to point to the risk of economic contraction. “The attitude of central banks, which prioritize inflation control and their expectations over economic growth, will have to be the base case for investors from now on,” explains Juan José Fernández-Figares, Link Securities Analysis Director.
The consensus calls for caution. Víctor Alvargonzález, director of strategy at the independent consultancy Nextep Finance, adds that “the Spanish market will continue to do quite well compared to other European and global markets.” Everything that has harmed him over the past 20 years, especially the lack of weight of the technology sector, now benefits him. The Capricorn composition is “suitable for an environment of high inflation and higher interest rates,” the expert says. They find the leisure and tourism sector attractive. “We have already seen the desire of citizens around the world to forget about viruses, wars and other hardships and how they are willing to take on the price increases in the sector,” they explain.
In an environment of rate hikes, banks are also one of their bets as, despite recent increases, they are “trading at historically low prices”. “We also love the energy sector for obvious reasons,” he adds.
Victoria Torre, Director of Digital Offer and Corporate Communication at Singular Bank, is a little more cautious. “The rise in rates benefits the banks, but as long as they occur in an environment of some growth; If recession fears persist, financial institutions may choose to tighten credit access conditions, which will undoubtedly affect their business prospects. This way we remain cautious in our exposure to equities,” he says.
In this context of caution, they believe that defensive stocks (pharmaceuticals or food) are slightly less attractive due to their high valuations. “On the other hand, we could bet on infrastructure-connected companies that are more resilient to inflation and have attractive valuations,” said Torre.
He agrees that the energy sector remains attractive, especially with oil prices above $80,” while, amid the energy shortage debate, utilities with exposure to renewables could outperform more defensively. Values like Aena, ACS and Repsol stand out among their favorites for the final stretch of the year.
“Actually, we’re not very good at forecasting. We pretend we do, but the truth is we don’t. These are the words of Alan Greenspan, president of the Fed between 1987 and 2006, that DWS analysts found a few days ago in a report to their clients acknowledging that, in the current environment, estimating what might happen in the medium term is almost impossible even for those responsible for monetary policy. This sense of uncertainty has weighed most heavily on the market since the outbreak of the war in Ukraine.
And the complex scenario of energy crisis and high inflation will continue to characterize the market for some time to come. Therefore, the experts agree that every data and every move by central banks will be the key to determining the future of the stock markets in the latter part of the year.
One of the indicators of investor sentiment most followed by the market is the Bank of America fund manager survey, which showed some improvement in some of its models in August. For example, 67% of investors believe that the global economy will weaken in the next 12 months. It seems like a very high figure, but it should be borne in mind that it is a July record of 79%.
Caution in Europe
As for Europe, 73% of respondents expect economic growth to slow down, also below the 88% of the previous month.
The outlook is undoubtedly a little less pessimistic than it was a few weeks ago. But the clouds are still very much in the document and we’ll have to wait for the September survey to see if sentiment has worsened after the latest central bank moves.
For now, energy and pharmaceuticals remain the preferred sectors of the surveyed managers compared to construction and real estate, which have taken the latter positions.
The research also indicates that the main concern for investors is still inflation and, in particular, its potential impact on consumption and economic growth. We must not forget that in economies such as the United States, private consumption accounts for almost 70% of GDP.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
