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ECONOMY | 05.07.2020

Coronavirus: Financial analysis VIII

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The euro and COVID-19 dilemma

The question of corona bonds raises the same doubts that first emerged during the euro crisis. Is the monetary union, as it is envisioned, a project doomed to fail? Or is the lack of progress in integration (in terms of a banking, fiscal, or even political union) the cause of its instability? In this article, José Luis Jiménez, the Group Chief Investment Officer for MAPFRE, and Javier Lendines, the Group Chief Investment Officer for MAPFRE AM, estimate the cost of financing these bonds.

Economic forecasts and alternative tools

The forecasts for GDP, profits and other economic variables published in recent weeks show a wide range of values, which highlights the difficulty of this task in the present circumstances. This creates added challenges for asset managers. Alberto Matellán, chief economist at MAPFRE Inversión, explains that this is forcing them to examine in greater detail their practices as investors, to expand their conceptual framework, and to turn to a wider information base.

Now we’re allowed out to play sport, why not invest in it?

The Spanish government has given priority to sport in the lifting of the lockdown, which highlights the remarkable and growing importance that sport currently has within our society. However, it remains largely ignored as a global investment trend with huge potential. Luis Garcia, a MAPFRE AM manager, says it is possible to find excellent companies trading at prices that, in his opinion, are really attractive, especially when looking for opportunities in Europe.

All your eggs in one basket?

The alternatives in which we can invest in our nearest circle are not currently very attractive, and we have been forced to look to other regions or other assets. Daniel Sancho, Head of Investments at MAPFRE Gestión Patrimonial, considers that the market and performance of the different assets have reminded us of the importance of diversification when building a portfolio, and that the best product for retail investors is the mutual fund.

Those who can handle this crisis will win the day

The institutional mutual funds market will be a clear example of the transformations and different working practices needed in a changing market and with new demands, which all members of the industry will need to adapt to. This is the considered opinion of Eduardo Ripollés, Director of Institutional Business Development at MAPFRE AM. This expert advocates active management in the current climate of low interest rates and great economic uncertainty for the coming years.

A brave stock to buy before America reopens

In these extraordinary times, investors need to be particularly demanding with the securities they include in their portfolios. Jonathan Boyar, President of Boyar Research, recommends applying “social distancing” in investment, that is, fleeing crowds and looking beyond large-cap companies in the United States. He is referring to orphan stocks or those that analysts and investors have dismissed. Boyar Research is the analysis unit of the Boyar Value Group, which recently reached an agreement with MAPFRE AM.

“The German court’s ruling on the ECB will have no effect, but invites reflection”

Following on from the catastrophic macroeconomic data, the German Constitutional Court’s ruling on the ECB’s purchasing program has set alarm bells ringing on the debt market. Alberto Matellán, chief economist at MAPFRE Inversión, explains that this does not imply any change for investors or for the monetary institution’s strategy, although it leads us to reflect on the ECB’s independence and the way in which Europe is being built. As usual, the expert offers recommendations for private investors in these times of heightened uncertainty.