The expert explained that with Russia’s invasion of Ukraine we are facing “exalted uncertainty”, which casts doubt on whether inflation will be temporary due to increases in the international prices of raw materials, such as energy and grains, since the Ukrainian region is important for the supply of these inputs in Europe.
“We are still in the middle of the economic cycle, we had been recovering from the important impact of Covid-19, the war issue may slow down some things, however, there is value in some companies and there may be opportunities,” said in an interview the executive of one of the world’s largest asset managers.
Mauricio Giordano considered that there are opportunities in companies that have the capacity to increase prices with inflation, that can grow over time, as well as those that are focused on the big issues that are not going to change, for example, those of consumption because, no matter what happens, people are going to continue consuming, this is not going to change even if something happens in Ukraine or Russia.
The interviewee mentioned that the war conflict has slowed down, for a moment, equities in Europe, however, there are companies with value and opportunities.
In the United States, he said, although the gains in the markets have not been homogeneous or generalized as in past years, there are issuers and sectors to be invested in.
Managers are investing in risk, he continued, because on the one hand there is a lot of liquidity and, on the other hand, there is no other alternative, since the interest rates that can be achieved with fixed income are “very low and even negative again”.
Giordano explained that “portfolios should be maintained with some variable income as long as there is a good selection of assets”.
The head of Natixis in Mexico added that risks are still present due to the Covid-19 pandemic and the Federal Reserve’s monetary policy on how fast it can raise interest rates.
Mauricio Giordano referred that in the latest Natixis Investment Managers survey, applied among global institutional investors, it was observed that allocations to equities reached 48.8% in portfolios in the second half of 2021, the highest since 2015, while inflationary pressures escalated.
There was even a shift towards technology sectors, healthcare and European equities over U.S. equities. In addition, the growing interest in investments focused on environmental, social and corporate governance (ESG) issues was confirmed.
For his part, Armando Rodriguez, CEO of Signum Research, said that despite the current situation, with the war conflict in Europe and high inflation, “equities are still an investment option”, although with a selective vision and a minimum term of two years, as value is still found in some companies.
However, an agreement between Russia and Ukraine, he added, would be one of the main catalysts for many punished valuations to recover.
“If we start from a scenario with a solution in the short term and eventually this helps the price environment (energy, agricultural raw materials and industrial metals) to stop increasing, there could be a recovery in valuations, but otherwise many companies will continue to be punished,” explained Armando Rodriguez.
In fact, he mentioned that in view of the inflation data (which in Mexico stood at 7.28% in February at annual rate and in the United States at 7.87%) it is likely that interest rates will increase. In the case of the Federal Reserve, it could act and raise rates by 25 basis points, while the Bank of Mexico could raise its reference rate by 50 basis points.
Armando Rodriguez added that in this environment, the opportunities to invest in the stock market are in companies with the capacity to transfer or increase their prices without affecting their sales; as well as those that are not impacted in their product demand by inflationary increases.
“These are examples of companies to look for, not only in the specialized consumer sector; telecommunications could also enter, to a certain extent, self-service chains and real estate investment trusts (fibers), mainly those in the industrial sector, can generate value. If the commodities situation remains at high levels, mining companies could benefit from higher metal prices,” added the general manager of Signum Research.