José Ramón Iturriaga: As always, optimistic?



The other day they asked me how I saw things and the tagline with which the question ended gave me the opportunity to write these lines: «Joserra, how do you see things, how always optimistic?»

And the truth is that it is not something sought after at all, but it is like that, I tend to see the bright side of things. Or rather, I tend to highlight the good things that are usually buried by the maelstrom of everyday life. It is not that the glass is half full, but that we do not get carried away to realize that most of the time it is half full.

There is a very clear tendency in the media to highlight negative news.

To some extent, bad news is more news. An example. Last week, one of the Spanish opinion leaders linked the improvement in contagion data - after several weeks in which his editorial line has been especially negative - with the conflict in Ukraine. He came to say that they do not come up to me because of the best data from Omicron because the Russians take over when it comes to bad news.

And the above is just an example. It is enough to watch the news any day to realize how good news, if it is commented, is always commented with suspicion.

Who would have told us just a few months ago that the economic recovery was going to be as it has been. Or that the much vaunted repeal of the labor reform was going to end as it has. Or that vaccines were going to be developed at the speed at which they have been developed.

If we look at it with some perspective, all the promises of recent years have fallen by the wayside. Maybe one day the world will end. But then perhaps you have to take it as Chavela Vargas: dancing. Meanwhile optimistic as always.

Germany pays to issue debt

For the first time since 2019, the interest rate Germany pays for borrowing went above zero last week. It is an important milestone that, although it has more symbolic value than anything else, represents a step in the normalization of the perception of risk after a few years in which we have lived outside what the manuals explain. Until last week the Germans did not cost anything to issue public debt. On the contrary, it was on their account. They borrowed 100 and after 10 years they did not have to repay more but less, a great deal. An anomalous situation that has been a consequence of the policies that central banks have been forced to follow. And luckily they did. The alternative would have been to build on the ashes, which of course would have been much more painful. In any case, it is necessary to celebrate that the types return to the positive ground. That the central banks, in a very orderly manner, begin to retrace the path traveled is very good news. He points out that they are beginning to see things more clearly and that after what they have experienced lately, he only has one reading.

In any case, logically this is not harmless for the markets. There has been a movement of tectonic plates that are now beginning to reverse. Evidently, the central bankers have been aware at all times of the risk of keeping interest rates extraordinarily low, but with very good judgment they have assumed it because it has served so that the outcome in recent years has not been dramatic. Well done.

Barring a catastrophe, the central banks, led by the Federal Reserve, will continue to ease off the accelerator. Rate hikes coupled with extraordinarily large balance sheet reductions are going to be the sign of the times to come. And there is a long way to go. It certainly doesn't look like we're going to go back to pre-great financial crisis levels. But even if what is finally undone is only a part of what was done, the consequences are many. Predictably, and given the mettle that the central bankers have shown, it is likely that it will be done in an orderly manner and announced in time. But it is not ruled out, seeing where inflation is, out of fear of going over the brakes. In the behavior of the different assets in recent weeks we have a very good clue of what may happen in the future. And although now it may seem unlikely to us because of what the market has done in recent years, it is practically the mirror of what they have done. Thought coldly it has all its logic. It is the forgotten assets of the hand of God that are going to take over from those who have done extraordinarily well so far. Positive rates is one, another, a sign that the repricing of all assets is underway. You may or may not ignore it. There each.

And if the American stock market falls, what happens to the Spanish one?

This is one of the usual arguments used for not investing in the Spanish stock market. There is no doubt that the Spanish is one of the worst behaved. But not because the American Stock Exchange corrects what the Spanish Stock Exchange has to do. And the start of the year is a good proof of this. The US tech index has fallen more than 10% from highs a few weeks ago. The fall in the index of small companies has been even more bulky. And yet the Spanish stock market in recent weeks has risen from the lows of early December and is one of the indices for developed countries that is showing the best performance this year.

The sectoral bias of the Spanish stock market is clear. There are few companies that in jargon are called growth. There are few pure technologies. And one of the most recognized, Amadeus, due to the specific circumstances of the last crisis has suffered a lot. The bias towards banking, real estate in its different versions, commodity companies and other versions of cyclical companies is huge. The other big leg of the index is 'utilities' in its broad definition. Thus, the behavior of the index has been what it has been in recent years. But if we are able to take some distance, the behavior of the Ibex35 in the last 30 years shows what its engines are. Three major periods can be distinguished. One first until the year 2000 that was marked by the technological bubble and in which everything revolved around Telefónica. The index was only the telecommunications company. From then on, the behavior it had until 2008 is a better reflection of its essence. In an environment of negative rates, the leadership was taken by the most cyclical sectors: banks, construction companies, raw materials.

And the last period and that we have closest is the one that covers 2008 until now. Since then, each threat of recovery has been truncated by some macro-key event that has practically returned the index to the starting line. But if, as it seems, after ten years managing misery, the page ends in this absolutely extraordinary period that we have had to live through, the reasons that led it to shine with its own light until 2008 are again in force.

The first step of that eventual mean reversion may already have been taken. What is happening with interest rates is a good sign. The fact that central banks are beginning to undo what has been done so far is important. Negative real interest rates, services recovering lost ground, income statements reflecting it, and valuations lay the groundwork for what we have experienced in recent weeks to be the beginning of something. Don't be surprised if he starts doing better. The reasons for this to be so are what they are -normalization of interest rates and economic recovery- and they may already be launched.

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