ECONOMY | 04.24.2020
Coronavirus: Financial Analysis VI
High volatility and falling asset valuations in financial markets can have a significant impact on companies’ balance sheets. Ricardo González, the director of sectoral analysis and regulation at MAPFRE Economics, analyzes the composition of insurance portfolios. Those markets where the majority of investment is in sovereign bonds, backed by the asset-acquisition programs of their respective central banks, have a more limited risk.
Recent forecasts by the IMF and the Central Bank of Spain for the world economy, and the Spanish economy in particular, have confirmed the severe impact of the pandemic. MAPFRE Economics forecasts that Spanish GDP will contract by between 5.6 percent and 10.7 percent, but they warn that this is a figure that will be revised according to the extension of the lockdown period. MAPFRE’s Editorial Team has analyzed the forecasts made by MAPFRE Economics (which were included in the Panorama report) and also by 35 other firms that have been made public since April
In their latest update of the Panorama report, the MAPFRE Economics experts have identified three major factors that will determine the severity of the damage that the economic fabric has been suffering over the last few months. These are: the nature of the virus and the unknown factors relating to it that still persist; the epidemiological strategies followed, such as suppression or containment; and the institutional reaction and the different measures that public administrations are taking.
Given the uncertainty caused by COVID-19, the analysis firms have not provided a specific estimate concerning the economy, but rather have incorporated a wide range of projections. The MAPFRE Economics Panorama Report, which we’ve become familiar with this week, has gone one step further and included a “baseline scenario” and another “stressed baseline scenario.” However, it also includes a third scenario, which it has called the alternative scenario, which we hope will not materialize under any circumstances in view of the bleakness of its analysis. MAPFRE’s Editorial Team analyzes each of them in this article.
Why are emerging countries more vulnerable? Apart from the obvious answers, the absence of robust health systems, the lack of public and private resources to combat the illness and the prevalence of casual labor that make it very difficult to stay at home without working, the MAPFRE Economics team agrees in its latest Panorama report on the financial vulnerabilities, which make many countries especially helpless when confronting this situation.
The economic standstill caused by COVID-19, which is unprecedented in recent history, is affecting all sectors and has particularly affected oil prices this week, causing them to plummet. In this interview, Alberto Matellán, the chief economist at MAPFRE Inversión, analyzes the factors that have caused this collapse in crude oil prices, especially in the United States, and its effect on oil companies and on the economy in general. Will we have deflation?
The severity of the falls in companies’ valuations and the extremely wide range of companies involved are quite unparalleled. Ismael García Puente, the investment manager and fund selector at MAPFRE Asset Management, explains in this article how, in times of stress, this dislocation becomes extreme and the law of supply and demand does not serve as a mechanism to discern the fundamental value of the businesses in which investments are made, either directly or through mutual funds. Here is his advice.
In recent years, there have been two major changes that make this crisis different from crises we have experienced previously. This is the opinion of César Gimeno, portfolio manager for American equity and multi-asset equity at MAPFRE AM. Firstly, he believes that there has been a very significant increase in the speed of information transmission (especially thanks to the Internet and social networks) and, also, new investment instruments have been made available to stakeholders (ETFs, in particular).