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: Waiting for the word - (Asia-Pacific markets declined with European futures up and those for the US flat) – Asia-Pacific markets declined, with markets cautious ahead of Fed comments in the context of rising oil prices.

Response to the crisis: Can’t conjure up doctors - (The deficit of health sector personnel boosts hiring of foreigners and their presence doubles in two years (Cinco Dias p23) – I recently commented on the importance of job training in order to solve the problem of having high vacancy rates coincide with high unemployment. Unfortunately, in some instances this is a problem that is hard to solve, as in some occupations, bridging the gap is not something that can be achieved via training courses lasting weeks/months.

Construction: Building blocks - (Cement consumption falls 1.3% in July and 7.9% in August (YTD -0.8%) due to the political uncertainty (Cinco Dias p24) – The Cement Producer’s Association blames the slowdown on the political uncertainty, decline in industrial production and delay in execution of Next Generation fund investments.nbsp; Although pressure on public finance ratios has been somewhat eased by the upward revision of GDP, the need to comply with EU rules could add austerity to the list of limiting factors.

Public finances: Does not feel like an improvement - (Tax pressure eases half a point in Spain after the revision of GDP figures by the National Statistics Institute (Cinco Dias p25) – Other than lowering Government debt and deficit over GDP due to revising up the denominator, an issue I commented on yesterday, the revision of the figures also has a positive impact on tax pressure (tax collection/GDP). This does not mean that taxpayers are better off, but it looks good on paper. The problem is that it also impacts on the perceived elasticity of collection to economic growth, requiring a larger increase in GDP to result in a given increase in tax collection.

Macro: Growing up - (Bank of Spain cuts its forecast of Spain’s GDP growth in 2024 by 0.4pp to +1.8% and warns about accelerating inflation (Expansion p32) – Downward revisions of growth and upwards of inflation are not a good combination. This said, once recovery from the Covid crisis has been achieved, the lagged effects of tougher monetary policy should start to be felt, so a slowdown of 2024 vs. 2023 should not surprise.

*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.