Juan Pablo García Vallades, Investment Advisor at Renta 4 Banco, spends a few minutes with Cope León to assess how the second quarter of the year started in the financial markets.
Valadés points out that the stock markets started the second quarter with moderate cuts, in the midst of very low activity, due to the near Easter break and the absence of relevant news. For the week, the Dow Jones rose very slightly, unlike the S&P and Eurostoxx, which were down 0.1%, and the Nasdaq was worse with a weekly decline of 1%. Soft movements somewhat dilute the euphoria that ended the first quarter but not too great.
The truth is that although the markets have sent us multiple messages in the first quarter of 2023 and although they continue to send us messages even on these half-holidays, it is not easy to draw clear conclusions from those messages, as they lend themselves to interpretations. different. From the data being published, one can explain both the gradual slowdown in the economy and the great resistance to entering a much-heralded recession. It’s mixed data, somewhat vague, and the same thing happens with the behavior of the markets.
If we see, for example, that the bond markets have moved from interest rates above 5% on Treasuries to 3.9%. In other words, Bonds went from ruling out a reboot of the economy to seemingly ruling out a recession, but not a strong deflation. The same goes for economic data. This week it was announced that the North American manufacturing PMI rose for the third month in a row, reaching 49.2 points from 47.3 previously, that is, it is still below 50, which indicates contraction, but shows that manufacturing activity in the United States stopped its fall. Also uncertain was the US March employment report released on Friday, in which the unemployment rate fell from 3.6% in February to 3.5%. Job creation is down fairly strongly compared to the first months of the year, but after a hike in interest rates like the one we saw and in the midst of the Silicon Valley banking crisis, the number of jobs created in March isn’t bad.
Regarding the current state of the economy, Juan Pablo points out that we will be at the stage when monetary measures will begin to affect the real economy, and he believes that this stage has begun with the SVB and Credit Suisse crisis. In his opinion, the adjustment of the economy will be in stages and in an orderly manner, albeit in the long term. A little, Japanese style, without going that far.
Last Wednesday in Washington, Kristalina Georgieva, Managing Director of the International Monetary Fund, anticipated the message that the Fund will deliver next week at its spring meeting. He came to say that global economic growth will be low for several years, citing it at 3% over the next five years, compared to 3.8% in the past two decades. That would be the lowest growth in thirty years, since 1990, which the Fund attributes to protectionism, particularly from China, deglobalization, geopolitical fragmentation, and a decline in international trade. For his part, Jamie Dimon said in his annual letter to JP Morgan shareholders, which was published last Tuesday, that the banking crisis is not over yet, and that its repercussions will continue for several years.
In Renta 4, these terms are identical. This is exactly the vision that they have maintained for so long, that of an economy that will grow below its potential for a long time, that will need financial assistance, but under a different model than the open bar and public bailouts, that will continue to indulge in a permanent crippling transformation. A shift that makes the economy more resilient to higher interest rates than it was in the past. As they commented on another occasion, we are seeing an economy that is shrinking and at the same time transforming, with a different adjustment from previous crises, with a K-shaped recovery, where stronger companies will emerge and others that don’t survive.
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