At this point in the year, it’s time to start thinking about what next year might bring. And when it comes to markets, what can move things the most is what we don’t expect. This is why it is necessary to have more or … It is less clear that, as the jargon says, the market discounts to try to anticipate a possible surprise. Given the low expectations after the US president’s erratic economic policies, if the US economy accelerates again, it would perhaps be the biggest surprise. It’s all happening because the impact of the trade war is dissipating and the One Big Beautiful Bill’s tax cuts are gaining traction. This is not the central scenario but it is not excluded. The other side of the coin is likely that inflation would accelerate more than expected, which would have consequences for US monetary policy. The evolution of the dollar is not obvious. Today, it is likely to continue to weaken, but the surprise could be the opposite.
Another possible surprise is that industrial activity is regaining its rhythm. And the surprise could probably come to Europe. The wave of relocations following the collapse of supply chains and increased defense spending can become the engine of the European economy. The big surprise would be an important step forward in the budgetary policy of the European Union.
On the monetary policy side, the most worrying thing would be if the American Federal Reserve lowers interest rates because it ends up giving in to pressure from Trump. The loss of credibility would be enormous and the consequences potentially disastrous for the dollar and the American debt.
As for the stock markets, the question will remain what will happen to the price of the so-called most magnificent companies. The failure or otherwise of the prices of these companies linked to Artificial Intelligence and the consequences that this may have constitute the greatest risk due to the weight of this group of companies in global indices. How this may affect the rest of the stock market and, probably more importantly, the very important investments that these companies are undertaking and which are today one of the most important drivers of the American economy is the big question that will continue to accompany us in the months to come.
Finally, regarding fixed income securities, a rise in interest rates and credit spreads cannot be ruled out. The deficit and public debt problems of some of the major developed economies and the sharp increase in issuance from hyperscalers are putting pressure in the same direction, which could end the tranquility of recent years in the debt markets.
The Spanish Stock Exchange will continue to do well
Another surprise regarding the stock market is that the Spanish stock market will continue to do well. And it’s a surprise that especially stings the Spanish investor who is closest to her, most aware of her comings and goings and who has been lost for some time.
The reasons to continue surprising are the same ones that have led him to perform better in recent times. The economy will continue to do well, much better than the rest of comparable economies. In addition, a change in tax policy accompanied by a possible change of government, which, on the other hand, seems to get closer with each passing day, could be the definitive boost to this economic cycle, super economic cycle, in which we are already immersed. Unless those who arrive do things half-heartedly and the margin is large, the jump could be very big because the tailwinds are enormous. Bricks, tourism and the balance of payments will continue to support growth which, today, after the long digestion of the previous bubble, rests on much more solid foundations..
Spanish stock market valuations remain attractive both in absolute and relative terms. And its composition has a lot to do with it. The greatest weight of the banking sector, which has weighed on it for a long time, is today what pulls it and will continue to pull it. Bank profits will continue to increase and for this reason the market will be ready to pay a higher multiple and more in line with what was paid a few years ago and what is now paid in other latitudes. Banks no longer anticipate their demise as they did three or four years ago, but they also no longer anticipate the profitable environment to which they returned after a long journey in the desert. Banks will continue to support the Spanish stock market, as well as the European market. And outside of banks, among the most average companies, there are things at extremely attractive multiples. Many of these companies have been off the investor radar for some time, and for one reason or another are still trading at levels near the multiples we’ve only seen in near-collapse eras.
And finally, positioning. Today, the Spanish stock market has probably ceased to be the market piñata that it was for a long time, but the exposure of stable investors is a testimony to this. Those who had sold their positions were forced to close them – by force, by hanging – but few – and least of all the Spaniards – took the train at this time.
Under these conditions, it is very likely that the Spanish stock market will continue to do as well as recently and for the same reasons. Additionally, what might happen next year is that some people will run out of excuses.
Plan
When it comes to financial planning, it’s not so much what I want but rather why I want it that should help us understand what we should demand from our investments and thus have the right relationship with our money. How I want to live my life, what I want to protect, what standard of living I want to aspire to, what legacy I want to leave, these are the questions I must answer to make adequate planning that allows us to find an ideal overall solution. You have to find answers to all these questions and you have to put those answers front and center and from there build that plan.
We also find ourselves in a time where, for various reasons, responsibility is shifting from the state and the company to each of us. This requires us to invest better, work more and stay financially active longer.
Longevity has changed the way we should approach life. The three-stage life we were used to is no longer like that. Our mentality has completely changed. What I didn’t do before, I probably did now. Living longer has very significant financial implications.
And the solutions must be proposed around what we could call three pockets: business, real estate and finance. It is important to remember that the order of heritage goes beyond the figure.
In the Spanish case, investment in brick predominates. Even if different phases must be highlighted. Young people devote their savings to their usual residence. As life progresses, other pockets appear. And the last step, the most pleasant, savings is based on financial savings.
The real estate part has a strong emotional component, especially in the case of Spaniards, and this includes habitual residence. It is necessary to carry out a detailed analysis of uses, the origin of income, geography, etc. And consider financial solutions for this pocket, such as investing in listed vehicles like Socimis, which are significantly more efficient.
Longevity implies a longer life but also greater savings. Longer lifespans mean you have to fund more time, which means you have to demand more profitability, which inevitably means taking more risk. In times of risky consumption, time is on our side in the long term. Because ultimately the risk is reduced to not achieving the real profitability I need to complete my project.
Traditional financial planning has become obsolete due to the diversity of “what if” questions. » It grows noticeably with a longer lifespan. The responsibility lies solely with us. We cannot count on outside help.
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