Patience in the midst of stock market turmoil

Fears that economies will not be able to withstand a near-term tightening of monetary policies continue to weigh on investor sentiment. The ECB is aware that, if it drastically changes course this year, the European economy could fall into a slump more easily than expected. However, if measures are not taken in time and inflation continues its upward course, central banks will have to adopt tougher policies within a shorter time span.

Although the market is already pricing in a gradual withdrawal of stimulus, we must remain calm. Ismael García Puente, investment manager and fund selector at MGP, believes that the real economy is not heading toward a doomsday scenario: “There is expected to be a shift in spending from goods to services (which would be positive for developed economies); inventory rebuilding is ongoing due to logistical problems; and strong capital investment (with a focus on the U.S.) which, as seen at other times, could precede productivity gains.”

Likewise, the risk of recession that some analysts are pointing to may be in the cards. Although the expert believes that it is not yet plausible “unless some large, external shock is takes place.”

In the United States, could this situation be remedied by a Fed rate hike? García Puente is not really focused on such a hike, which the U.S. markets have already priced in, but to the way in which the Fed’s balance sheet will be reduced. The key, therefore, seems to be “what kind of bonds they are going to sell and how fast they are going to sell them.”

Concern in the US is also present in the stock markets, where falls are showing “the bitter side of the concentration of some indices in just a few stocks and the consequences of passive management.” The case of Meta (Mark Zuckerberg's company), which is facing an unprecedented situation after plummeting 25% in a single day, is one of the most striking. Despite the tough competition with other platforms, the new data policy in Apple devices or the threats made to the European Union relating to the storage and use of user information, the expert believes that new managers are emerging who “had not taken an interest due to the stock prices, and who, with these falls, are beginning to perceive them as value companies.”