It has always been said that the main enemy for equity markets is the doubts that are generated in the economics, politics and about the business world. It is true that doubts generate significant instability in the equity markets. To the point that it is one of the main reasons for their stock indices to collapse in the configuration of their prices. Beyond other considerations of a technical nature and perhaps also from the point of view of its fundamentals.
In any event, the only thing that is certain at the moment, there are still many questions to be resolved, both in the national equity markets and outside our borders. And that will be the ones that will determine that the bag go up or down in the coming months based on many of these variables. Therefore, from now on, you will have no choice but to be very aware of these important parameters if you want to make your operations on the stock market profitable. Both in terms of opening and closing positions in their securities.
Within this general context, we are going to offer you some of the doubts that are still unresolved today. There are many but in any case we are going to list some of the most important and which will be the ones that will influence the behavior of equity markets from now on. In one sense or another, as you will be able to verify from now on. Especially to develop your investments in the second half of the year. Period in which you must concentrate your strategies on investment if you really do not want to make mistakes that put your available capital at risk.
Market doubts: recession
The macroeconomic data do not offer any doubt: we are facing a period of economic slowdown in the international order. Well, now it remains to be seen if this movement in the international economy can lead to a new recession. In this sense, the latest reports from international organizations, such as the one made by the International Monetary Fund (IMF). Where it is evident that a year ago, economic activity was accelerating in almost all regions of the world and the growth of the world economy was projected at 3,9% in 2018 and 2019.
Much has changed since then: escalating trade tensions between the United States and China, macroeconomic tensions in Argentina and Turkey, disruptions in the automotive industry in Germany, the tightening of credit policies in China, and the contraction of financial conditions that occurred in parallel with the normalization of monetary policy in the largest advanced economies have contributed to a significant weakening of world expansion, especially in the second semester of 2018.
Forecasts for the IMF's Future
As forecast from the International Monetary Fund (IMF), they consider that the weakness will persist in 2019, in their report on the world economy (WEO report, for its acronym in English) a growth contraction is projected in 2019 for 70% of the economy world. Global growth, which touched a maximum of 4% in 2017, decreased to 3,6% in 2018 and would continue that trajectory to be located by 3,3% in 2019. On the other hand, they emphasize that the situation is worse than they expected and encourage governments around the world to launch their alerts.
While on the other hand, it is stated in the International Monetary Fund report that “the prospects faced by many countries are very harsh, marked by considerable short-term uncertainty, especially as the growth rates of advanced economies converge towards modest long-term potential ”. This fact may be reflected in the equity markets, by correcting their positions while this scenario lasts, which is not at all optimistic for international economies.
War between China and the United States
All financial markets are pending on what may happen with this factor. In the short term, there is no doubt that it is being reflected in the stock markets around the world. Despite the hope that the matter will be settled positively in the end. Most likely in the second half of the year. But in the meantime it is detracting from the international stock markets, even with very severe falls in some trading sessions, with depreciations above 2%. Not surprisingly, according to some international reports, world economic growth will depend on it. With a decisive influence on the equity markets.
While on the other hand, it may be a fact that is alleged over the next few months which could bring more instability to equity markets around the world. Any news on this noteworthy fact is scrutinized by the different financial agents. To the point that it can cause large falls or rises in the stock market. In any case, what it is generating is a lot of instability in the markets. Where volatility is being one of its main common denominators at all levels.
Rate hike in the euro zone
Although in recent months it is an issue that has been somewhat forgotten by the equity markets, it is present there. So that small and medium investors are aware of its evolution for when the time comes to form their next investment portfolio. In principle, it is programmed that the interest rates go up over the next year. But any change in strategy can lead to very violent movements in the equity markets. We will have to be very expectant about the decisions that the European Central Bank (ECB) may take.
In this sense, there is no doubt that there would be great losers and benefits in the securities that make up the national variable income. Regarding the former, it would be the banks that with a scenario of the price of cheap money have less intermediation margin to generate their profits. While on the other hand, The beneficiaries of this measure are the electricity companies. It is not surprising that in the last six months they have appreciated above 30%. Being the best sector of Spanish equities, by far. In addition, they are the ones that distribute the best dividend, with returns above 6%.
Definitive exit from Brexit
The definitive exit of Great Britain from the community institutions is being traded less and less on the stock market due to the fact that this eventuality has already taken place. It should still worry us, but with the intensity of the last few months. Where it practically determined the evolution of the bags from all possible points of view. From now on, it will not be as decisive a factor as before, although it may give more than a scare to some of the most affected stocks. As they are in national equities, Santander, Sabadell, Iberdrola and about the airline IAG. They may still suffer large corrections in their prices from now on.
The definitive exit of Great Britain can suppose a respite for the small and medium investors. More than anything because they will remove a doubt from above and this fact can lead them to develop their investment strategy with more optimism than up to now. At least it will be a factor that will no longer be listed on the stock market from that date on the final exit from Great Britain. It is expected that this decision will not be delayed for long, luckily for a good part of the small and medium investors.
The European locomotive slows down
Political and economic instability can reach one of the most powerful countries in the European Union such as Germany. The ghost of the early elections it flies over all European stock markets and this is not to the liking of small and medium investors. That they see how a new doubt grips them to make a decision from these precise moments and that on a certain date it can exert a very strong selling pressure in the equity markets. Beyond other technical considerations that will be the subject of another analysis.
On the other hand, we cannot forget the great influence that Germany has for the development of financial markets throughout the European continent. Where all the data point in the sense that there is an economic decline worthy of consideration. And that it can take to the bags to lower levels of which they are quoted at the moment. As well as its psychological effect for a large part of small and medium investors. To the extent that they could opt for the short positions instead of the buyers. Or even so that they are in a position to contract a series of financial products based on the bearish current of the stock markets. With everything that implies applying this strategy in investment. Beyond other technical considerations that will be the subject of another analysis.