“It is going to be a good year for financial asset prices; Fixed income and stock markets have a lot to say.” This is how forceful Roberto Hernanz, head of Private Banking Markets at BBVA Spain, was during a session organized jointly by La Vanguardia and the financial institution to analyze the economic outlook and investment trends for this year. Held this week at BBVA's headquarters in Barcelona, the session brought together a large audience eager to learn about the paths that 2024 will take.
Led by Elisenda Vallejo, editor-in-chief of Economy at La Vanguardia, the session also included the participation of Daniel Gómez, director of Private Banking at BBVA in Catalonia; Sonsoles Castillo, Chief Economist of Economic and Financial Analysis at BBVA Research; and Juan Pedro Morenés, from the Business Development team in Spain at Allianz Global Investors. Allianz is one of the largest global investment managers specialized in the topic of artificial intelligence, with which BBVA works to build Private Banking portfolios.
Daniel Gómez, who was in charge of welcoming the attendees, recalled that in 2023, when everything seemed to point to a recession, it was a year of “strong growth.” The Spanish GDP closed with a rise of 2.5% and the IBEX grew by 22.7%, “the best delivery in the last ten years.” Unlike what happened in other years, it was an “especially good” year for all investment vehicles.” And if 2023 was a “great year” for BBVA clients, 2024 is going the same way. “At BBVA we manage assets worth 118,500 million euros, with a growth of 17.4%, and a 12.1% increase in the number of clients,” he reported, highlighting that, of this total assets, 15,000 million correspond to Catalonia. BBVA, he continued, has a team of 707 people throughout the country, 154 in Catalonia, “highly prepared managers up to date with market developments” to offer “quality advice” so that clients “make the best decisions.” financial decisions.
“The fundamentals indicate that the economy will grow at a good pace, inflation will slow down and interest rates will fall. But let's not trust ourselves,” Castillo warned, but not before highlighting the divergence in terms of growth dynamics between different European economies. In this sense, he recalled that the euro zone has recorded several quarters in which the economy was practically stagnant, mainly due to the situation in Germany, "a very industrial economy" that has seen its competitiveness penalized by energy prices. But compared to that European area, which last year grew only 0.5% and with forecasts for 2024 of 0.7%, the Spanish economy is going at a good pace. It closed 2023 with GDP growth of 2.5% and the data observed at the beginning of 2024 “allow us to be very optimistic,” said the Chief Economist of Economic and Financial Analysis at BBVA Research.
The two factors that are being very positive and explain to a large extent the behavior of the Spanish economy are private consumption, which is growing, an increase that runs parallel to the dynamism of employment, and the good performance of the export sector, especially services. For the rest of the year, Castillo argued, the drivers continue to be the moderation of energy prices, “which will allow the control of inflation and lower interest rates,” and the tone of fiscal policy, which has been “a lever” and that it will continue to be expansive. Regarding inflation, Castillo stressed that it has been moderating. The latest data in Spain is 3.2% and the forecast is that this year it will average around 3%, a mark that "is still above the 2% objective set by the central banks." Hence, they are going to act with “caution” when undertaking the cycle of interest rate reductions. The European Central Bank (ECB) could begin rate cuts at its June meeting, but the economist warned that, unlike the hike cycle, which was “rapid and aggressive,” the hike cycle will be “gradual.” “This year they could go down 75 basis points and another 100 next year,” she explained. The Euribor is already falling, anticipating this cycle of declines.
In a global world, we must also observe what is happening in other latitudes, such as the US or China. In the case of the US, far from entering recession as predicted, its economy had strong growth last year. “And today we are in the same situation,” said Castillo, who assured that the available data even raises the question of whether, instead of slowing down, the US economy could not be “reaccelerating.” One of the factors that has supported this growth last year, the accumulation of family savings, is running out. As for interest rates, she predicted that the Federal Reserve could lower after the ECB does.
After the ECB does it. A case in point is China, which faces new “very relevant” structural challenges, such as the aging of the population, in addition to “intrinsic” problems, such as its real estate sector. “The risk of an adjustment in the Chinese economy is there, but the country could use levers to avoid a sudden adjustment, with fiscal and monetary policies,” said the head of financial analysis at BBVA Research, who said that the world will have to get used to it. for the Asian giant to grow at rates of 4% and not 10% as in the past.
In an “increasingly uncertain environment,” Castillo highlighted that there are uncertainties and risks, “with which we have to learn to navigate.” Among them, and in the short term, inflation, the key for central banks to lower rates. “The big question is whether the deceleration process is going to take us to 2% sooner rather than later or if inflation remains anchored at higher levels, 3%,” he observed. And of course geopolitical risks, a top priority to monitor. “Any intensification of conflicts in the Middle East can generate upward tensions in oil and if raw material prices suffer, this will probably translate into inflation,” she warned.
Since 2024 is an election year, not only in the Basque Country and Catalonia, but also in Europe and the US, these events could change the scenario. “We are not unaware of the impact that a Donald Trump victory could have,” for example, in terms of international trade, based on the statements that are already being made, Castillo stressed. On the other hand, if Joe Biden wins, there will be continuity. At this point, Hernanz recalled that, if you look at the historical context, an election year in the US is a good year for the stock market, even when Trump won in November 2016. “A catastrophe was announced and in the end it was one “one of the best years in the market,” he added.
And how do all scenarios affect the investment? The head of Private Banking Markets at BBVA Spain defended that 2024 will be a very good year, as was 2023, which “went from less to more” and “with a final sprint that allowed us to close a good year for practically all of us.” of investable assets. “It is an easy year when it comes to making decisions. “It is the perfect year to be well balanced in both fixed-income and variable-income assets,” he explained to ensure that 2024 has had a “bittersweet start,” because the stock markets continue to rise, with the best stock market start since 2019, but with a fixed income, one of BBVA's big bets, which has not finished working in the first quarter. But in March, he added, we have already begun to see better functioning of the debt. That, with regard to sovereign debt, because corporate debt “has worked well.” “We continue to have an optimistic vision, we can enter at very attractive prices and sooner rather than later this cycle of lower interest rates will occur,” he said, adding: “Even in the unlikely event that we had a recession, the assets of debt would perform extremely well.”
Hernanz also saw progress in equities. “The scenario without recession and even with acceleration of growth is gasoline for the profits of the companies that support share prices,” he proclaimed. He also stressed that the stock markets have run a lot this first part of the year, “even with a certain overheating,” hence his opinion that a calmer scenario would be “healthy” for them to “oxygenate.”
The boom in artificial intelligence is not unrelated to this good mood in the stock markets, Hernanz said, where it is still difficult today to glimpse the significant productivity gains in the more traditional sectors. And AI, which could reach human intelligence in the next 10 or 15 years, is one of the greatest business opportunities in all of history, according to Juan Pedro Morenés, who was accompanied at the Allianz Global Investors presentation of your digital avatar. From this company, which is one of the international managers with which BBVA works to build portfolios in Private Banking, they highlighted that artificial intelligence is expected to contribute to global growth by 15.7 trillion dollars in 2030, which is equivalent to the entire GDP of the Chinese economy.
AI, as Morenés emphasized, is not only a technological disruption, but it affects all sectors transversally and drives innovation in areas such as medicine and health, the home, the internet of things, agriculture or the retail commerce. “It is no longer science fiction, but is part of our daily lives,” he stated, before ensuring that there are three major pillars of investment: AI infrastructures itself, such as semiconductors or big data, AI applications and, finally, opportunities in traditional sectors that benefit from AI.
Morenés gave some examples of companies that use AI and even had the presence of Pluto in the room, a robot dog powered by Nvidia graphics cards, which in addition to shaking hands and making funny things, “saves people,” since it It is used in rescues after disasters or for the deactivation of anti-personnel mines. All the examples, he declared, lead to the same conclusion: “There is nothing more interesting than investing in AI.” Because, he concluded, it is the way to participate in the greatest technological revolution in history and the greatest business opportunity of the coming decades.
