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: She loves me, she loves me not… - (Asia-Pacific markets rose with futures for Europe up and those for the US less so) – Asia-Pacific markets rose as worries about the short-term outlook for financials declined and bets increased on a slower pace of rate increases by the central banks. Futures for Europe rose and those for the US less so.
Response to the crisis: Spain is different - (The majority of EU countries have automatic adjustment mechanisms to make their pensions sustainable (Cinco Dias p24) – This is a case of “Spain is different” as most countries have systems to ensure the stability of public pension systems via increases in the retirement age depending on life expectancy. In Spain the adjustment is expected to come via increases in the payroll tax. Given Spain’s population pyramid this seems a particularly negative choice.
Banks: Not quite “Whatever it takes” - (Lagarde calls for prudence from the banks in order to maintain their strength through the storm, with the ECB ready to act to maintain stability and provide liquidity if needed (Expansion p13) – Whatever Lagarde’s other qualities, a way with words is not one of them. “Whatever it takes” had a better ring to it. It is the central bank’s job to try to reassure markets, but I doubt this will have much of an impact on the market.
Monetary policy: Back to the guessing game - (Governor of Bank of Spain says that the ECB must be prudent and not signal future decisions (Expansion p16) – The above signals the end of forward guidance. This is not positive, although understandable in the current environment, as forward guidance was a very useful tool in order to influence inflation expectations and markets without actually having to tighten interest rates and liquidity, which could have unforeseen consequences.
Macro: Busting the dam - (Bankruptcies rose 144% in 2022 vs. 2019 while in the EU they declined by 11%) – According to Eurostat bankruptcies in Spain represented 8% of the European total in 2022 vs. 3% of 2019. It looks like the bankruptcy “moratorium” applied during the Covid period only succeeded in delaying the bankruptcy filings rather than providing more time to fix the problems. In any event, it is also worth bearing in mind that Spain’s recovery from the Covid slump has been milder than that of the rest of the EU.
*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.?