Investors are confused. In many cases, they are savers seeking to protect the purchasing power of their portfolios amid rising inflation, zero returns on safe assets in a context of zero or negative official interest rates, and the recent increase in market instability.
They hear that the inflation we are experiencing is due to exceptional factors related to the pandemic we are overcoming. However, they fear that if high inflation persists over time, it could feed back into the production process. What is clear is that central banks are prepared to prevent this.
Economic agents, including investors, have accumulated significant savings that could turn into spending and reinforce the strong economic growth we are already observing. European funds can also accentuate this process by boosting demand. However, recent international events affect our sentiments and also generate uncertainty about the future.
Investors require certainty when making decisions. Naturally, uncertainty derived from exogenous factors cannot be fought. However, certainty can also come from the authorities’ own decisions, such as establishing a clear fiscal adjustment strategy in the face of the high public debt accumulated during the health crisis, or adequate communication regarding monetary normalization. Although, in the short term, the most prudent approach is to subordinate any decision to strengthening financial stability.
We will never have a scenario of complete certainty. When making financial decisions, both the objectives to be achieved and the risks one is willing to assume must be taken into account. Banks know this very well because their activity focuses precisely on managing risk. And they do it well.
José Luis Martínez Campuzano, spokesperson for the Spanish Association
