FINANCE | 05.28.2020
“Now is a good time to pick out companies that know best how to reorient their business”
We are heading for a new normal, a new world after the pandemic. Many companies will therefore be considering how to refocus their businesses — especially those in the hardest hit industries like tourism, for example.
Alberto Matellán, Chief Economist at MAPFRE Inversión, believes the market has a more positive tone thanks to a better perception of the health and economic data as well as the abundant liquidity. However, he remains cautious since there will still be some tense times with high volatility.
In an interview on the A Media Sesión program on Radio Intereconomía, he says that “now is the time to wager on a wide selection of companies, using a reliable analyst and manager to identify which companies will come out of this crisis on top.” “In that sense, I would not be investing in one industry as a whole, but in those companies that are best prepared to refocus their business when all this has passed,” he adds. With this shift in market sentiment, as well as the rebound of airlines or companies linked to the tourism industry, banks have skyrocketed. And, as he points out, “a slight improvement in macroeconomic data in turn leads to an improvement in the sector’s profit expectations for this year.”
This all stands in contrast to ECB President Christine Lagarde’s update of the economic forecasts. The institution now expects GDP to fall 8–12 percent this year. However, it does not consider the debt levels to be a cause for concern. “It is somewhat reassuring when a central banker tells us that they are not worried about the debt given that they are the main buyers of that debt. If we look at other cases, such as what is happening in Japan, we see heavily indebted countries that have withstood for a long time,” says Matellán. However, he states that “while there are other more urgent problems to solve in the short-term, the problem of the extent to which it is sustainable should be raised in the long-term.” And despite the forceful measures already announced by the monetary institution, it still sees some scope for action there. “If there is one thing that we have to give central banks credit for, it is their imagination when it comes to solving problems in the short-term,” he argues.
In addition to these industries, there are also good prospects for gold, which acts as a safe-haven asset in some crises. Some experts actually estimate that it will be over USD 2,000 per ounce by the end of the year. “Right now, gold is rising because those scenarios that are being run are those for which gold and other precious metals can function well as safe havens. Allow me to give you an example: one of the immediate consequences of the pandemic was that the whole market began to assess the possibility of a return to deflation. And right now, people are gradually starting to talk about future inflation,” said Matellán. That is why he believes that the weight in a well-diversified portfolio could be increased.
