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FINANCE | 04.30.2020

“The private investor must keep a cool head and get on board with the recovery plan”

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Much of the world has started to decelerate, albeit very gradually and cautiously. The same caution is being taken by investors when it comes establishing positions. Alberto Matellán, chief economist of MAPFRE Inversión, explains, in an interview on the A Media Sesión program, on Radio Intereconomía, that, in this context, the private investor has an advantage:

“Unlike the institutional investor, who has to wait for a new scenario to be created in order to be able to invest, the individual investor already has this scenario available, which is his profile. Therefore, you must continue with your profile as a scenario and keep a cool head.”

In this regard, Matellán recalls that there are two investors who benefit from a big crash, such as this one, those who sell before it happens—but for that we are already late—and those who do so when the recovery arrives. “You have to wait for that second type of winners, because we have already lost the Again, there are two important players at the macroeconomic level and, in particular, on monetary policy, with new meetings of the Fed and the ECB.

Matellán argues that the ECB has scope for action “given that central banks’ imagination is infinite and can create new tools.”

But he also indicates that we should ask ourselves whether it really needs to do so. For example, the M3 data has been released today, which indicates a high volume of monetary mass and, therefore, shows that liquidity problems have been alleviated by measures that have already been taken. Moreover, the borrowing of eurozone countries is being supported, as their decisions have helped to control risk premiums. “The measures that have already been taken are working, now they just need to be left to run their course,” the expert says.

What is clear is that we are heading toward a more indebted and poor-debt-quality world. Yesterday, Fitch caused surprise by announcing a rating cut from Italy, outside of the schedule that they usually follow, leaving it only one step away from the high yield ground. Matellán takes a more positive view, which is that the agency also draws a more stable medium-term outlook, as it does not expect further declines over the next few months, despite the expected economic impairment.

Economically, the US advances first-quarter GDP, confirming the strong economic setback caused by the virus. MAPFRE Economics, MAPFRE’s research service, predicts a reduction of between 4 percent and 10.8 percent this year. In this regard, Matellán also warns that the second quarter will be even worse, not only in the US, but in all countries. “The important thing is what happens in the medium-term, and everything points to a recovery that would already be priced,” he says.

In the United States, bailouts have already been announced in the airline industry, one of the industries that are most exposed to the crisis. Matellán explains that these bailout plans must preserve employment and well-being, of course, “provided they do not harm the long-term and do not prevent an efficient way of working.” In this regard, he concludes with a phrase from economist Milton Friedman, which could be applied in this case and poses a risk: “Nothing is more permanent than the temporary measures of government.”