The vigorous recovery of the economy that was glimpsed after the end of the crisis caused by the pandemic seems to be losing some steam. Some dark clouds loom on the horizon in the form of price tensions, largely caused by rising energy prices, and global supply bottlenecks. In addition, the rebound in COVID-19 infections in some countries is a permanent sword of Damocles for growth.
The financial markets, however, remain oblivious to all these uncertainties. Many Stock Exchanges are close to their all-time highs and even the most lagging have recovered at least the levels prior to March 2020. Spanish savers, amid the tensions of the present and future expectations, seem to be sticking with the latter. This is attested by the wave of the investor confidence survey corresponding to the third quarter of 2021. This indicator, prepared by JP Morgan Asset Management and published exclusively by EL PAÍS, only slightly declines with respect to the May-June period, when it reached maximum . The index, which is made with the responses of those surveyed (1,370 interviews in this wave) on what they think the Stock Exchanges will do in the next six months, closed September at 3.73 points, compared to 4.02 in June.
When the participants in this study are asked what are the reasons for thinking that it is “probable or very probable” to see increases in the markets, the most repeated opinion refers to the fact that the pandemic “is stabilizing”. It also highlights the argument that points to the “improvement in the economic and financial situation.”
In this wave there has been a change regarding which is the Stock Exchange with the greatest potential for Spanish savers. If a quarter ago the favorite market was the United States, now the highest expectations of revaluation are concentrated in European equities, in second place are Asian stocks and third place is for the Spanish Stock Exchange. On the other hand, Wall Street falls to the fourth position among investors’ options, since it is the one that accumulates the most rise in recent years.
As usual, the optimism of savers about the future of the Stock Exchanges does not translate in practice into a bet on risk assets. Interest rates remain low, as central banks will keep the price of money low – unless inflation rushes – to give air to states with growing public debt. This expansionary monetary policy does not prevent the majority of Spaniards from opting for deposits or checking accounts. Specifically, 39.8% assure that they will bet on these liability products in the next six months despite their low profitability (to which we must now add the strong rise in the CPI that leads to negative real returns in most of the cases). For its part, the number of people who will invest in mutual funds or buy shares falls. 17.7% of those surveyed say that they will not invest in anything in the medium term and the main reason is that they do not have the money for it.
In line with this conservative strategy, when citizens are asked what their main objective is when investing, the most common answer (42.9%) is “not to lose money”. 28.3% are willing to sacrifice part of the potential profitability in exchange for certain security, while only 28.8% of investors indicate that their priority objective is to make money. Most of the respondents do not usually have a planning when it comes to saving for their retirement, making periodic contributions when they accumulate a certain amount of money.
A context that remains favorable
JP Morgan Asset Management’s strategic vision for the last quarter of 2021 continues to be marked by economic optimism and a preference for risk assets. “We saw the peak of growth after the pandemic between April and June. Now the pace has moderated, something normal because the figures for the second quarter were not sustainable, but we will continue to grow above the average for the remainder of 2021 and also in 2022 ″, points out Lucía Gutiérrez-Mellado, strategy director of the manager U.S.
The reasons for optimism, according to this expert, are several. First, the corporate sector will continue to drive growth, as shown by the rebound in investment. “In addition, families have accumulated significant savings bags. As the uncertainties are cleared, this remnant should be transferred to consumption ”, he argues. Obviously, the economic outlook is not without its risks. “The pandemic continues to have collateral effects on production chains as there is a mismatch between supply and demand. We are also closely following China to see what the growth impact of the latest reforms is. ” What about inflation? “We think it is transitory and we expect that in 2022 it should moderate, although it is likely that we will have higher levels than the previous economic cycle.” From the manager, they believe that central banks, first the United States, will withdraw stimulus, but they do not believe that we will see interest rate rises until the end of next year at the earliest. “We continue to bet on equities, especially in developed countries. In fixed income, we like high-yield corporate debt ”, concludes Gutiérrez-Mellado.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.