Take 5 and come back tomorrow

First of all, let’s be clear. The following is not investment research/advice.?And, as such, it involves no investment recommendations. These are my thoughts on Spanish equity issues, which I find relevant. I share them freely (and not just as regards price). As always, I am only trying to help. Please read the rest of the “discomplainer (*)” at the end of the article.

Market environment: There will always be hope - (Asia-Pacific market were up with European markets and US futures basically flat) – Asia-Pacific markets were modestly up on hopes of Chinese stimulus. European markets and US futures were basically flat.

Response to the crisis: We may not have enough carrots - (The Treasury provides record funds to regions upset at cessions to Catalonia (Expansion p22)/The Treasury threatens the opposition PP with a €4.6bn cut in expenditure by regional and local governments if does not support its budget deficit target (El Espa?ol) – There seems to be some discrepancy regarding the attitude of the Treasury to regional/local governments. But it boils down to a carrot and stick approach. The problem is that there might not be enough carrots.

Wages: From minimum to maximum - (The Minister for Labour proposes a 4% rise in the minimum wage to €1,123/month in 2024 (Expansion p25) – Raising the minimum wages would seem to make sense in order to offset the impact of inflation. But it adds to the labour costs especially of SMEs. And in order to preserve profit margins, or in some cases viability, it may lead to higher prices, adding to inflation pressures, which then lead to more pressure to increase the minimum wage.

Macro: Follow the money - Labour costs rise 5,7% in Q323 the highest increase in 20 years (Expansion p24) – As I mentioned in the comment above rising labour costs, especially in a service economy, can lead to inflationary pressures. One of the problems is that actual wages rose 4.9%, but “other costs” (aka payroll tax etc.) rose 8%. So, employing a worker is getting more expensive. But he is not getting the money.

Macro: If wishes were horses, beggars would ride - (The Minister for the Economy guarantees to investors a continuity in economic policy (Expansion p23) – Guaranteeing to investors a continuation of current policies may seem good from a short-term perspective. After all the recent market performance has been good. But it is mainly based on the idea that deficit fueled growth can coincide with falling interest rates. Sometimes I wish It could.

*The above information has been read/understood/summarised/evaluated/copied as well as I could to provide a guide to Spanish equities, given available timing/intellectual constraints, and I accept no liability for misreading and/or mistranslating the original copy as set out in my previous article (which I urge you to check, as I am only trying to point you in the right direction, I hope). As for what you may decide to do, after reading the above, please contact your legally approved provider of investment advice on Spanish equities.