Markets in search of the real rate

Inflation remains above the Banco de México target, which is why specialists consider that the increase in the prices of the basic basket will be sustained or that it could be reduced, but moderately.

Even the central bank mentions that the upward risks are: the persistence of core inflation at high levels, external inflationary pressures derived from the pandemic, greater pressure on agricultural and energy prices due to the geopolitical conflict, exchange depreciation and the cost pressures.

However, in the investment field you have to learn to live with these inflationary levels. “By maintaining a well-diversified investment portfolio with a long-term focus, we can make inflation become a mere anecdote. In particular, global stocks, plus inflation-linked bonds, can be very attractive so that we don’t worry about inflation, ”he commented in an interview with The EconomistPablo Bernal, director of the wealth segment for Latin America at Vanguard.

Bernal said that the key is the long term because in the short term (periods of less than 5 or even 10 years), it may not work as well. Hence discipline and patience are transcendental.

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Luis Rodríguez Amestoy, the new general director of Asset Management BBVA México considered that we are experiencing a period of higher inflation than we have experienced in the last 15 years. “We believe that inflation in Mexico is reaching its peak and that we will soon see it drop. The big question is how fast would we go down to inflation that is within the central banks’ target? which can be gradual.

“The low inflation of previous decades was very much caused by issues of globalization, operational efficiencies and productivity, and in the current situation, structurally inflation will be slightly higher, because now there is an upside-down issue of globalization, but we do not believe that We are going to reach very high inflation”.

Rodríguez explained that in environments of inflation with high rates, investments in shares become less favorable, especially in companies that are highly indebted, because that will increase financing, “companies that have more solid balance sheets, with more than quality in value are the ones with the best prospects”.

According to the BlackRock Investment Institute’s Global Outlook 2023, the four-decade period of mostly stable activity and inflation is over.
In the voice of José Luis Ortega, Director of Debt and Multi-Assets for BlackRock, “the new regime of greater macro and market volatility is taking shape. A recession is forecast, central banks are on their way to getting too tight in their attempt to control inflation.

“This keeps the company tactically underweight developed market stocks. BlackRock expects to turn more positive on risk assets sometime in 2023, but we’re not there yet. And when that happens, we won’t see the sustained bull markets of the past. That is why a new investment playbook is needed,” Ortega said.

Opportunities

For Pablo Bernal, in the long term, global actions appear attractive to generate interesting returns. “Within the different regions of the world, Vanguard estimates a better performance for the next 10 years for global shares ex-United States, than for those of the American market.”

He considered that for an intermediate term (5-10 years), given the recent rate hike, duration bonds show much better expected returns than at the beginning of the year. “It will depend on an investor’s risk tolerance, but emerging market and corporate bonds could further increase future returns.

“Of course, with a higher level of risk. For those who do not have the luxury of the long term, we are going through a moment where short-term rates have increased considerably in the face of an effort by central banks to curb inflation. Both in dollars and in pesos, an interesting nominal return can be obtained without greater term risk. At the same time, inflation-linked bonds can offer protection against inflation in the short term.

Rodríguez explained that the central banks adjusted their monetary policy, so interest rates rose, inflation seems to have reached its peak. “The market has already set a price…we believe that for an investment portfolio, now is a good time to be or start investing in long-term rates.”

Juan Rich, Director of Stock Market Analysis and Strategy at Grupo Financiero BX+, it is important to have a part in liquidity, invest them in short-term paper and generate a return and take advantage of the levels of Udibonos and bonds. “In equities, we see positive financial groups, consumer companies, the industrial sector, and industrial fibers.”

Jorge Gordillo, director of Economic and Stock Market Analysis at CI Banco, considered that a diversified strategy is an option to have returns in the future, look for stock market opportunities, for example, in the food sector.

“You need your portfolio to have a return above inflation, Cetes and bonds are an option, but it is important that they approach financial advisors,” concluded Hugo Petricioli, CEO of Franklin Templeton Mexico and Central America.

patricia.ortega@eleconomista.mx

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