“We prefer the American stock market because of its better positioning in sectors of the future”

In our latest MAPFRE AM interview, we spoke with César Gimeno, American equities and multi-asset manager at MAPFRE AM, who advocates for the US stock market in light of its greater resilience and positioning in industries of the future, where Europe “is lagging behind.” Gimeno also sees opportunities in the European equities market due to weakness and the possibility of a higher-tan-expected interest rate cuts.

• How long have you been at MAPFRE AM and what is your role there?

I've been at MAPFRE for 6 and a half years. My current role spans two major areas of work. On the one hand, I manage US equity portfolios and, on the other, multi-asset portfolios and funds, where asset allocation plays a fundamental role.

• MAPFRE AM has a financial center in Boston, how do you liaise with them?

The main channel of coordination is via the Global Asset Allocation Committee, where the different MAPFRE Group investment centers meet on a quarterly basis to share their different visions of the markets.

• One of your responsibilities is to work with our partner Boyar. What does this boutique contribute to MAPFRE AM?

Boyar has a clear focus on the analysis process; this is particularly valuable for companies where market analyst coverage is more limited. What's more, it provides us with a local vision of the US market, which is very relevant given the importance that this market represents on a global scale.

• Tell us a bit about MAPFRE US Forgotten Value: investment policy, main portfolio commitments, its performance…

MAPFRE US Forgotten Value focuses on what we call forgotten companies, which are all companies to which the market does not pay much attention, either because of the sector in which they operate or because of their size.

In this sense, the fund has significant exposure to small and mid-cap companies. Some of the fund's main positions are in this segment, such as Madison Square Garden Sports, owner of the New York Knicks NBA team, or Merkel Group, an insurer focused on specialized insurance.

• The Fed is further ahead in the cycle than the ECB, how can this affect different assets/markets?

The Fed raised rates not only before the ECB but also more aggressively. As a result, the US economy has managed to keep inflation under control while maintaining the level of activity, which has surprised a large part of the market. In turn, Europe, despite having implemented a more cautious monetary policy that has partially curbed inflation, has seen its economic growth stagnate. In fact, a large part of the continent is in a technical recession.

• Having considered this, will your preference be for the US or European stock market in 2024?

We prefer the American stock market, not only because of the aforementioned resilience, based on the strong consumer appetite of average Americans, but also because of its stronger positioning in sectors and industries of the future, where Europe is lagging behind. In any case, and from a tactical perspective, we see an opportunity in Europe given the weakness shown and the possibility of a greater than expected rate cut by the ECB.

• By sectors, technology is a classic in the US. What is your forecast for this sector? And looking beyond technology, what other sectors do you have your eye on this year?

The technology sector has been one of the big winners in 2023 and we believe that its results in 2024 will continue to be solid. However, it is important to bear in mind that the appraisals of many companies in the sector are very demanding, especially if you take interest rates into account. In any case, we believe it is very important to do a more granular analysis, as it makes little sense to compare a company that manufactures semiconductors, which has significant capital requirements and major exposure to the economic cycle, with a cybersecurity solutions company, where both the volume of assets and exposure to the cycle are much lower.

• The SEC has given the go-ahead for bitcoin ETFs, what do you think about this?

I think the SEC's approval is a positive thing. Whatever your opinion of Bitcoin as an asset, the fact that investments can access Bitcoin through more solvent and transparent platforms and with a higher level of supervision and control is always a positive thing.

• This year will see elections in the US, how do you include this risk in your analysis?

Our investment process is structured around risk management and one of the tools we most often use is the design and construction of possible scenarios. In this sense, when looking toward the US elections, our focus is not only on trying to predict what will happen, will Trump return to the presidency? etc. but on identifying each possible scenario and ramification, as well as the implications that each of these will have, with a particular focus on the quantification of the impacts.

Personal side

• Hobbies: Riding my bike and spending time with my son. I have rediscovered LEGO and I’m not sure who enjoys building more, my son or me.
• Favorite food: I’m a fan of pulled pork; it's just a shame it takes 8 hours to prepare
• City/country: Kyiv, a city that, unfortunately, many people only started to hear of as a result of the brutal invasion by Russia; however, it is home to an innumerable amount of hidden gems, which I would recommend to anyone who likes to travel.
• Favorite musical group/singer. Recently I've been listening to a lot of electronic music, although two of my favorite bands are Depeche Mode and Arctic Monkeys.