Caution with the Christmas rally: “Any minor change can become magnified”

Markets are already gearing up for next year with signs of hope, but also caution: investors are aware that the epidemiological situation may cast a shadow of uncertainty on the first months of 2022. While the stock markets anticipate an eventual Christmas rally, Alberto Matellán, chief economist at Mapfre Inversión, warns that “there is little liquidity these days, so any minor change can become magnified.”

In an interview on Radio Intereconomía, the expert believes that the latest data of the year, corresponding to third quarter GDP, will not be significantly surprising, although he points out that, “the data may give a sense of how the world economy will perform in the first stages of the year.” In his opinion, while the latest downward revisions in Spanish growth may knock us down a peg, he stresses that, “we must focus on the coming year.”

On the other side of the pond, politicians are debating Joe Biden’s spending bill, something that Alberto Matellán interprets as a “significant fiscal boost.” However, he qualifies his statement, claiming that, “due to technical issues, it is not a very reassuring plan.” “It makes little sense to push forward a massive fiscal boost when inflation is so high,” he explains. The price level, together with interest rates, has dragged down the Turkish lira, which seems to have regained calm for the time being. “When an event like this occurs, there is always a fear of a contagion effect moving through emerging countries and Europe.” Beyond the fuss of the last few days, the expert clarifies that the issue is limited to the country itself, so “the capacity for contagion is marginal.”

Looking ahead to the coming months, where we may see “swings in both stock markets and economic data,” and in the midst of a period of uncertainty due to possible changes in monetary policy, he claims it is time to remain prudent in the portfolios of retail investors.