Banca March provides that the process of slowdown of the global economy will continue in the remainder of 2019 , according to has revealed Joan Bonet, director of Markets Strategy of the entity, during the presentation of the market prospects for the coming months.
Given that the entity predicts an economic growth more moderate than in the past decade, analysts of Banca March point to the need to invest in a different way, by increasing the alternative asset , as well as the investment in capital projects risk , that allow to capture the premium for illiquidity of the markets.
The combination of economic slowdown and lower inflation points to a scenario of returns reduced , especially in regards to the fixed income denominated in euros. In this asset class, Banca March continues to foster the investment in debt of emerging countries denominated in foreign currency.
The team of Markets Strategy indicates that, although the bags are well valued, the current levels of interest rates is conducive to its attractive relative to fixed income. In addition, from Banca March highlight the importance of the dividend yield against the bonds. However, they warn that it will be necessary to a recovery of corporate profits for the occurrence of further revaluations. "We believe that will continue the revisions to the low benefits expected for 2020, which are at levels of 5%, compared to 10% of the consensus. For this reason, we recommend caution in the short term," says Bonet.
By sectors, the entity is shown supported to continue to invest in technology, as well as in defensive values , as european companies specialized in health or energy companies global, which traded at valuations more reasonable than other sectors, such as steady flow or the electrical sector.
From a geographic point of view, the entity identifies interesting opportunities in emerging markets , particularly in Asia, where they consider that the penalties of the market have been excessive.
In a context marked by trade tensions between the united States and China, the uncertainty surrounding the outcome of the Brexit and the return of central banks to tighten monetary policy more expansionary, the analysts of Banca March are expectations of global economic growth at 2.9% , compared to 3.6% in 2018. However, although the rate of growth is found in the lowest levels of the last decade and that the industry shows signs of contraction, since the entity is expected in the second half of 2020 the world economy to grow at a pace of 3.2%, driven primarily by private consumption and services.
The intensification of the protectionist measures also points to a scenario less favorable. Although the central scenario of Banca March continues to be that there will be an agreement between the united States and China, which would reduce the risk of a global recession, the times said covenant shall be relevant to determine the degree of deterioration of international trade, which currently grows to its lowest level in 10 years. Taking into account that the first world power will come in 2020 in an election year, the team of analysts of Banca March expected to achieve a prior understanding, since historically the reelection in the united States is linked to the good performance of the economy.
In Europe, Germany, one of the main victims of the trade friction, will go through a technical recession , on the contrary, the u.s. economy might be able to dodge. In parallel, the output of the United Kingdom of the European Union continues to set the political agenda to the closeness of the date of disconnection and the climate of confrontation prevailing. The scenario of a Brexit hard has gained strength in recent months after the arrival to the Government of Boris Johnson. All indications are that there will be a call for early elections and an extension of the term of exit, says Bonet. In this sense, the forecasts in the Strategy team of the Markets of Banca March for the course of a Brexit without agreement anticipate a contraction of uk GDP of around 1.2% in 2020 and close to 2% in 2021.Germany will go through a technical recession that the u.s. economy will be able to dodge
For the whole of the euro zone, the entity expects a growth of 1.1% in 2019 and 1.2% in 2020. In the case of Spain, Banca March also see a gradual slowing down , but the national economy could maintain a growth differential compared to the Eurozone rests on the strength of its domestic demand. The entity estimated that the national GDP will advance 2.2% in 2019 and by 1.9% in 2020.
As the main risk for the Spanish economy, the equipment of the entity that it identifies a lower momentum outside, and the absence of structural reforms in a context of political uncertainty.monetary Policy
After a brief period of attempt to normalize monetary, the economic slowdown has led central banks to re-inject liquidity in the system by becoming net buyers of assets. "However, the impact on the economy will not be immediate, as it can take 12 to 18 months to react to the monetary stimulus", it indicates Bonet. In addition, it warns that the momentum of the central banks will be less aggressive than anticipate the markets. "The market is discounting a reduction of interest rates aggressive that are not compatible with our scenario of economic slowdown, which should not lead to a global recession", he explains.
In terms of inflation, Banca March provides that it will remain structurally low, but does not expect a scenario of deflation, given the strength of the labour market.
In the case of the United States, the entity expects a price growth of 1.7% for 2019 and up to 2% by 2020 , which is a level significantly higher than that of the Eurozone, which puts inflation at 1.3% for both in 2019 and in 2020. In Spain, this percentage is slightly lower, with a 1% expected for the current year and 1.3% for the next.Date Of Update: 24 September 2019, 22:03