The economy and the risk of three major “shocks”

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“When this happens, quarantine through and after a successful global fiscal and monetary policy, we will be in a different world.” The assessment, which looks beyond the coronavirus pandemic, belongs to Leonardo Chialva, a partner at Delphos Investment, who assures that the world economy will be much more interventionist and with less space for the private sector.

The specialist participated in a teleconference organized by Dracma in a virtual modality that replaced the usual face-to-face breakfasts. There was also Agustín Arreguy, financial analyst at the Cordovan firm.

The latter assured that the numbers that are already being seen in the world speak more of a depression than a recession: “JP Morgan’s forecasts for the United States are for a fall of four percent in the first quarter and of 14 percent in the second, to recover later and end with a drop of 1.5 in the year ”.

Chialva analyzed that, for the economy, this scenario is “a kind of 2008, mixed with 9/11 (attack on the Twin Towers in 2001), with some characteristics of (the crisis of) 1930 that governments are trying to avoid from developed countries ”.

In this framework, he recalled that, in the United States alone, 6.5 trillion dollars will be injected between monetary policy (Federal Reserve) and fiscal policy (Treasury) and the same is being done in Europe.

“What must be avoided is that the capitalist financial system collapse, that companies and people cannot return the money to the banks and the system fails,” he said.

“Shocks” in threesome

For the Delphos Investment analyst, this situation implies “an enormous risk of three major shocks

  • First, that of debt and monetary issue, would generate a “huge change in relative prices because dollars, yuan, euros will be issued.” Coins will be worth less and that, if the package is to succeed, “should be reflected in better asset prices like gold and stocks.”
  • The second impact is a “shock to globalization: 20 million to 22 million people flew per day. Many countries, such as Europeans, which had ceased to have an important industrial role, had a great contribution from tourism and that will change. “
  • The third is he shock in “productivity and efficiency”. The factories concentrated production in a few plants in Asia with a high level of productivity and now “they are going to have to diversify geographically, reduce efficiency and profit levels, which impacts companies.”

Leonardo Chialva, of Delphos Investment

“What is at risk is the capitalist future as it is designed. It will change, as it did after the crisis of ‘30. Politicians are in their sauce. This will leave us with a much more interventionist and less globalized world. It will end with higher tax pressure, a lower level of efficiency and productivity, more welfare, “he assured.

For investors

Regarding sectors, in the medium term, tourism, the aviation industry and net exporting countries will be the most complicated, like the Europeans, while more closed economies, such as those of Brazil and Argentina, will feel less.

Chialva recommended betting on a rebound in the markets in the medium and long term, but warned investors to target stocks of good quality companies and sectors that are not at risk. And he exemplified it with the oil sector, in which he suggested a financially sound company like Petrobras instead of YPF.

For his part, Arreguy remarks that those who already have investments maintain them, even in the midst of this high volatility. “In the last 30 years, 21 ended positive (in the markets), despite years with very strong intra-annual drops. So if we get out of an investment now, it is likely that we will end up losing much of the recovery, “he warned.

Meanwhile, the investment recommendations are bond securities and very conservative funds in both pesos and dollars.



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