Central banks will keep interest rates relatively high until the reduction in inflation fully takes hold and, in parallel, will continue to withdraw liquidity from the system. The injections of the Central Banks came to reach around 15% of the world gross domestic product (GDP). This radically changes the financial scenario of the Covid19 period.
Santander, held this week at the Foment del Treball headquarters and organized by La Vanguardia, Banco Santander analysts reflected on the macroeconomic framework and the risks and opportunities presented to investors in the new situation.
Sónia Colomar, territorial director of Banco Santander in Catalonia, who opened the event, highlighted that the global economy has stayed afloat and has overcome challenges. She said there are still challenges, such as inflation, high interest rates, failures in the supply chain or a lack of personnel. "But," he said, "we must be optimistic. The business confidence index has improved appreciably, employment registers a positive evolution and inflation in March has already stood at rates of 3.3% in Spain as a whole and 3.1% in Catalonia”. She highlighted that technology and digitization play an increasingly important role in improving efficiency, competitiveness and transparency. She warned, however, of the risk posed by climate change.
Sónia Colomar also said that at Banco Santander they are very attentive to innovations and transformations in the economy and society in order to advise and help their clients. "We want to be - she pointed out - allies of our clients and support them in all areas to jointly develop the best financial risk management practices". In this regard, she added that Banco Santander is the leader in Spain in Corporate Banking.
During the debate, which was moderated by journalist Enric Freire, the bank's head of the Catalan Markets compared the forecasts made at the previous Santander Markets Forum, six months ago, and confirmed their accuracy. He highlighted that all the products that were recommended then have fulfilled their hedging function, both on the risks of interest rates and inflation as well as on the options on the Ibex. In relation to the latter, he pointed out that the invested premium would have already been recovered and that, from now on, everything would be benefits.
Antonio Espasa, director of Macroeconomics of the Market Area of Santander Spain, explained that we have entered a new scenario, in which zero interest rates and the massive injections of liquidity from central banks have come to an end. “You have to understand that this was temporary and that everything gradually returns to normal. In Spain, both companies and individuals have understood this very well, have been prudent, have maintained the savings rate and have not abused credit. This gives great strength to the economy, because very little debt has been generated, which allows possibilities for greater growth”. In the United States, on the other hand, he said, families have taken advantage of favorable financial conditions, without taking into account that they would be temporary, taking on excessive debt. This now, with the intense rise in interest rates and the closing of the credit faucet, becomes a serious problem that will slow down growth in the world's leading economy.
Antonio Espasa also explained that the Spanish economy in the fourth quarter of 2022 has performed better than expected and is performing better than its European partners. Now, thanks to its greater exposure to tourism and the service sector, it has ample room for growth. "Thanks to the drop in inflation, except for food, individuals and companies are recovering real income and that will favor consumption."
It also considers that the growth of the euro area will also be better than expected thanks to lower energy prices and the better performance of economies such as Spain or France.
He said that the high energy prices registered as a result of the invasion of Ukraine implied a large transfer of savings to producing countries and that now, as prices moderate, these flows change, which would also influence a better behavior of the economy of the eurozone.
The director of Research Asset Allocation of Santander Spain, Gerardo Puerta, based on the exposed macroeconomic scenario, predicted that the dollar is too expensive and that, at some point, it will have to make a correction. He said that it has been eleven years of bullish leadership of the dollar, due to the higher interest rates of the Federal Reserve, and that now the returns between the set of currencies must begin to normalize. He believes that the dollar-euro will range between 1.10 and 1.20. In any case, he qualified that everything will depend on the evolution of energy prices, which are a very difficult variable to predict because there are many factors that affect them. He added that the market is positioning itself neutral.
To protect himself from fluctuations in the dollar-euro exchange rate, which is the price that most affects the economy and Spanish companies, Albert Fita shared three possible value solutions: the forward or exchange insurance, the forward with settlement and the accumulator. In his opinion, these three products adapt to different customer profiles, although he pointed out that it would be best to mix the three.
Gerardo Puerta, regarding investments in variable income, said that it is necessary to face a horizon that will be very volatile with coolness and serenity. “But you have to look for luck – he affirmed – and, therefore, you have to be prepared to invest when the opportunity arises”. He acknowledged that the market is pessimistic. "If there are falls -he added- it is time to buy". He said that he prefers stocks like European ones where the expected performance of corporate earnings may be better than on Wall Street. “You have to look for bags that are cheaper,” he added.
In this regard, the head of Markets for Catalonia, Albert Fita, explained that Banco Santander has very attractive structured solutions, which are adapted to the profile of each client, from 100% risk over three years, for example, to 100% guaranteed capital operations. .
Both Gerardo Puerta and Albert Fita also recognized that this year fixed income is very attractive because interest rates are above inflation expectations. In this sense, they highlighted that the credit differentials (“spreads”) of the companies are above the state public debt and there are good opportunities. At ten years, yields of over 4% can be found. Only 5-year Spanish bonds now offer 3%, compared to the average 0.77% they have generated in recent years.
Jordi Guasch, Director of Markets for the entity in Spain, closed the event with the presentation of Banco Santander's online investment platform, Bolsas y Mercados, in which more than two million people trust to make their investments. Through this platform, clients can invest in national or international stocks, with more than 2,600 ETFs at their disposal. They can also buy treasury bills, forex trading and even guaranteed deposits with attractive returns. "All the contracting of these financial instruments -he said- can be done quickly, agile and easily". Additionally, he commented that there is a section where clients can see the portfolios of world-class investors, such as Warren Buffett, George Soros or Bill Gates. There is also the possibility of accessing Bolsas y Mercados through Telegram, where clients can receive market information, first thing in the morning, with an analysis of what happened the day before and what analysts expect to happen next. the day, relevant news and the closing of the American market. Lastly, Jordi Guasch recalled that Banco Santander has been considered the best Research bank since 2016 by the Institutional Investor.
