August brings bad memories for many investors and professionals. Some are hard to forget: in 1990, for example, there was the Iraqi invasion of Kuwait and the bankruptcy of the giant hedge fund of the time Long-Term Capital Management LP (which had to be bailed out by other financial institutions under the supervision of US Federal Reserve), causing a 9.5% drop in the Standard & Poor’s 500 (S&P 500). In 1998, the Russian government devalued the ruble, stopped paying the internal debt and declared a moratorium on the payment of the external debt, which caused a correction in this index of 14.6%. In 2001, after the burst of the tech bubble, there was a recession that led to a cut in this benchmark of 6.41% and, to point out another, in 2015, a devaluation of the yuan ended up sending the S&P 500 back by 6 ,25% Despite these difficult Augusts, the general data on the behavior of the stock markets in this summer period somewhat contradict this perception of a month that hinders the “summer peace”. In fact, from 1950 to the present, the August performance of the S&P 500 has been rather flat, with 55% positive results versus 45% negative results. Since the beginning of this millennium, the situation has been even better: the S&P 500 has performed negatively in August in 39% of the years, with an average fall of -3.72%. Much more times, therefore, positive than negative.
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Despite this, as Virginia Pérez, Investment Director at Tressis, points out, it is not uncommon to see that some investors adjust their portfolios to calmly face these hot months. However, in her understanding “there is no specific financial asset that is universally more suitable for summer periods”. The important thing, in her opinion, is to base investment decisions according to financial objectives, time horizon and adequate selection and diversification.
With this background clarification, this expert, with a view to avoiding concerns in the very short term, dares to point out that, given the persistent inflation, the resistance of the labor market and the forceful message from the central banks about possible additional increases in interest rates of interest, “these may remain high for longer than expected just a few weeks ago.”
From this perspective, he acknowledges his preference for positioning himself in fixed income assets in the shortest terms, “where attractive coupons can be obtained”, and especially in high-quality European private fixed income. Virginia Pérez also points out that, despite this search for tranquility, in these coming months of August and September, we must be attentive to “any correction in the market, which we consider will be an opportunity to build portfolios, betting both on the US stock markets ( especially in the technology sector) and by European indices, with a lower valuation than other regions”.
Along the same lines, and despite acknowledging that it is true that movements in summer tend to be more abrupt due to the drastic reduction in market liquidity, Miguel Ángel García, Investment Director at Diaphanum, maintains that there is no specific best option for these weeks except the treasury, although in his opinion, it really “can be incurred, apart from the expenses of dissolving the portfolio, in an opportunity cost for not having been invested”. Although the most important thing is, in his opinion, “not to make wrong decisions at the worst moments”; to gain peace of mind, he maintains that “it is time to buy 12 or 18-month fixed income to guarantee adequate profitability, since we think that short rates are going to remain in the current situation for a few more months and that they will begin to fall in the as inflation decreases. With a longer-term vision, he is also committed to acquiring medium-term bonds issued by quality European companies. For both options, he opts for investment funds always in euros so as not to depend on currency movements and knowing that “fixed income is neither income nor is it fixed, and along the way there may be significant fluctuations.”
Nerves of steel
Almudena Mendaza, head of sales at Generali Investments, believes that for the moment investors can rest easy if they go towards fixed-income assets, “with which they will obtain returns between 3%-4%, either from company titles or from public debt”. In her opinion, it doesn’t make sense these days to unwind investment positions to leave the money in checking accounts. “The offers in this regard are very few and, in general, those few offer short-term returns below 3%, so, in any case, monetary funds or those with returns to maturity are more attractive,” he points out. she. Almudena Mendaza also believes that more than being aware of this month of August, “we must be attentive to what will happen after the summer.” According to her, there could be a correction in the stock markets that could invite new positions to be taken in sectors such as the energy transition or that linked to the aging of the population.
Ricardo Comín, Vontobel’s Sales Director, believes that the current moment is the best of all worlds for a conservative investor. In his opinion, “you can enter fixed income and simply wait for the corresponding coupon until maturity. The returns are attractive enough; What’s more, it may be that in the not too distant future we will remember this 2023 as far as the profitability of fixed income securities is concerned”.
Accounts more than deposits
For investors who want to keep their money “at rest” despite the data on the general behavior of the stock markets in August or the returns that fixed income securities can offer, there are not many alternatives. It is well known to all that Spanish banks continue to not remunerate deposits despite the rise in interest rates. At most, some entities offer checking accounts with some return: this is the case of the MyInvestor account, which pays 2% the first year and up to 50,000 euros, or the Sabadell Account, which returns 3% of purchases up to the September 30, with an APR of 2.5% (up to 750 euros). There is also the N26 Account at 2.26% APR with no maximum amount or the Bienvenida Evo Smart Account, with a return of 2.5% APR up to 30,000 euros.
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