The choice between the products from fixed income or variable income is one of the decisions that arise for your investments for the second half of the year. After the second one has passed with a better grade than expected the examination of the first six months of the exercise. With its logical surprises and with many doubts along the way. But at the end of the day they have closed this period with a favorable balance for the positions of small and medium investors, which is what it is finally about.
In this sense, the analysts of Renta 4 Banco are very clear about their preferences since they are very notably maintained by equities versus fixed income in 2019. Not in vain, they see this investment strategy with more attractive valuations in terms. Within a scenario considered as a deceleration, but not a recession. A factor that with certain frequency is being debated in the financial markets and that is the one that is encouraging a good part of the investors not to take positions in the values of the variable income. For fear of a big crash in the stock markets. Something that so far has not happened, far from it.
On the other hand, monetary policies will continue with their gradual normalization during 2019. If this is the case, as expected in the coming months, it would be a good opportunity to open positions in the stock market to make a profit. savings from now on. Beyond other technical considerations and maybe also from its fundamentals. Or at least it is a very relevant aspect that they are discounting the financial markets. Not surprisingly, this fact invites us to buy very selective values in equities, both nationally and outside our borders.
Economic cycle slowdown
In any case, the Renta 4 Banco analysis department emphasizes that developing any investment strategy for 2019 will have to take into account in the coming months that we are under a scenario of a slowdown in the global economic cycle, while maintaining reasonable levels of activity. On the positive, some financial conditions still favorable and, as the main drag on growth, to which this financial analyst also adds "the high indebtedness at a global level." It will be an aspect to take into account in the coming days or months.
Regarding the eternal doubt of sim, it is necessary to allocate the savings to fixed income or to variable income, they also have no doubts since they maintain a clear preference for the second of the investments indicated. Where this investment strategy can be favored to the extent that the economic activity will continue to support the evolution of business results. That according to the estimates of this financial institution they think that it can even reach the digits. In other words, in some cases the stock would still have a potential amount of appreciation with respect to current prices.
More problems in fixed income
While on the contrary, fixed income will no longer have the explicit support of central banks. As a clear sign that they can take a series of risks if in the end this apparently more conservative or defensive decision is chosen for small and medium investors. Where without a doubt that a lot of money can be lost along the way due to the current position of these financial assets. Not surprisingly, at any time it can give some other displeasure to users who are positioned in this part of the investment.
Not surprisingly, it is no mystery that according to this study, investing in equities is still more attractive in these, even speaking in historical terms. With discounts that ranges between 10% and 30 %, and with a PER that is close to 30 years. On the other hand, within the variable income it is estimated that the European can be more beneficial than the Spanish for small and medium investors at this time. To the point that it has broken some very relevant supports that were ahead of it in its price.
Increase in volatility
In any case, financial analysts also have an impact on the fact that expected returns in equities will not be exempt from volatility. This is an aspect that we have been able to verify during the first six months of this year, with strong differences between its maximum and minimum prices and that in some cases have led to differences of over 4% or 5% in the valuation of their prices in the equity markets. Being one of the main dangers for savers in this second part of the very special year. Especially if monetary policies change on both sides of the Atlantic, which is something that is being put on the table in the stock markets right now.
On the other hand, we must also take into account the many risks derived from growth (attention to trade negotiations between the US and China) or political (Italy, Brexit, European elections and the conflict that may reignite in Ukraine, among other facts relevant). Either way, this possible increase in volatility will generate buying opportunities throughout next year's deadline. That is, of course, business opportunities will be generated from now on. As is almost always the case with the complicated world of money.
Why buy fixed income?
Positions favorable to this class of investment strategies have a positioning based on a calmer savings model until now. But this scenario can undoubtedly change from the next few days or weeks and the worst thing is in what way these changes in the perception of risks can occur. Because in effect, fixed income is ceasing to be that peaceful financial asset which he enjoyed until this very moment. If not on the contrary, it can become a much more dangerous investment than equities itself or even from investment models considered as alternative.
Of course, another aspect that must be valued in fixed income is the low profitability that offer their different financial products at the moment. Where it is very complex to obtain an interest higher than 3% or 4%, as you have been able to verify in recent months, both this year and the previous one. Even at the risk of leaving a few euros on the way. Something that has been reflected in investment funds based on fixed income markets. With depreciation in their respective investment portfolios.
What is better to invest in now?
This is the million dollar question that a good part of small and medium investors are asking themselves before the panorama presented by the money sector. Well, everything seems to indicate that they will be investment models based on equities. Because to get a higher return savings will have no choice but to take some risks. While on the other hand, expectations at the moment for equities are better than for fixed income. At least with regard to what will actually happen in the second part of the year where the stock market deserves more confidence to make savings profitable in a way that is more satisfactory to the interests of savers.
It should also be stressed that the technical side of equity markets is not bad. Not much less. If not in some cases, maintain an upward trend very well defined and that can help small and medium investors make the most correct decision. Although at the cost of taking more risk in the operations that are going to be taken from the next few days or weeks. Where it is also true that anything can happen as a result of all the pending issues that the stock markets have.
Dividend yield
On the other hand, it cannot be forgotten that the average return offered by dividends on shares is situated at levels very close to 5%. That is, more generous than the interest rate of the main fixed income products and that it is a fixed and guaranteed income every year. Whatever happens in the equity markets. And this is a factor that plays in favor of the stock market in the most conservative or defensive investment profiles.
Because they have very relevant income that at the moment is not guaranteed by other financial products of any kind. In listed companies belonging to different sectors of business activity. From very moderate values to others that are very aggressive but that in the end agree on this factor: they provide money to shareholders. With up to 8% interest rate.