The evolution of interest rates is one of the factors that determine the direction that stock markets around the world will set. In both measures, depending on whether the monetary strategy is to raise or lower them. It will be a more than decisive parameter for you to open or close positions in the equity markets. Up to very demanding levels as you have seen in recent years. Influenced by the policies carried out both on one side and the other of the Atlantic.
In the current economic situation, the decisions of the central banks of the main production areas in the world are becoming more relevant. With great regularity in the movements that have been generated as a result of the intentions of those responsible for monetary policy. To the point that they can make you win or lose a lot of money in the operations that you formalize from now on in the main financial markets. That is why it is very important that you be very attentive to its evolution in the short and medium term.
From this general scenario, there is no doubt that interest rates will be a more than relevant factor for you to prepare your investment strategies. Above another class of analysis, both in the technical linkage as fundamental. For this same reason, you will have more than one reason to control your investment portfolio. With some values more sensitive than others to assume these movements in the price of money. Either way, put yourself in the worst case, because all the predictions go in the direction of an increase in interest rates.
Types: why are they decisive?
With regard to the American financial markets, things seem clearer than in the European ones. Not surprisingly, it is not surprising that all that is going to be the consequences of the policies of Donald Trump they will see each other next year. From this complicated scenario, there will be no choice but to be prudent with certain American values for once more. They can generate more than one negative surprise from these moments. Because one of the biggest fears gripping small and medium investors is that the general trend of the markets in this economic zone could be reversed at any time. As we have warned you from this medium.
Low interest rates are always much more beneficial for equity markets than in the opposite trend. For reasons already explained in previous articles. By this this explanation any Change of trend they can impose the short positions on the buyers. In any case, it will be the perfect excuse for you to abandon your positions if you are invested in the financial stock markets. It can be the most effective strategy to defend your savings more forcefully in your strategic approaches.
Another very different thing is what is happening in the types of the old continent. Where anything can really happen. The reactions generated by financial markets from now on can be unpredictable. A little protection will never hurt you to develop any kind of strategies. Although everything seems to indicate that the rate hike will be in the medium term. But not during the next few months since the same trend will be maintained as until now. That is, with a very cheap price of money, at a historic 0%.
What sectors are most vulnerable?
This year may be the year of the banks. This is the statement of many of the analysts who closely follow the equity markets. For a very simple reason to explain and that is based on the fact that they will be the main beneficiaries of a possible decision by the European Central Bank (ECB) to raise rates during this current year. In which case, it would allow them to generate higher returns on their business accounts. As a consequence of the rise in interest rates on all its lines of credit. With a respite after the bad years harvested in recent months.
It is, therefore, a sector to which you should pay special attention from now on. With a upward potential certainly powerful if this scenario is fulfilled with rates in the euro zone. In fact, at the moment they are quoted in the markets with great strength. Above other sectors of special relevance and that are lagging behind with respect to the most important financial groups in the country.
In the opinion of equity experts, there is a select group of banks that many like and can be the object of your purchases from now on. In this sense, the banks that analysts like the most are BBVA, Bankinter and Bankia. Both in terms of its results and fundamentals. The second of them being the clearest bet on the part of financial intermediaries. To the point that they may also be the ones that best pick up a more premature decision on a change in the trend in interest rates.
Other sectors greatly benefited
Another of the big bets for the end of the year if this scenario is fulfilled are the so-called cyclical values. Among which stand out the industry, luxury and tourism products and services, among others. In the latter, the airlines, hotel groups and reservation centers stand out. In all cases, they will be able to perform better than the rest of the stock market sectors. With high chances of getting high profits if you choose them to invest your savings in this period.
In some cases, they are even trading at a certain discount from the target price given to them by financial intermediaries. With potentials that can reach up to 25% in the most favorable proposals for your interests as a small and medium investor. It can be an opportunity to open positions some of these securities and include them in your next investment portfolio. To the detriment of listed companies less likely to develop hikes after interest rate hikes.
What are your performances?
But what really matters to you is how you can take advantage of this new scenario that loses to present the economy of the old continent. Although for them you have to modify your equity strategies, sometimes in a much more aggressive way than usual. You will have the occasional clue about what you have to do through the intentions expressed by its director, Mario Daghi, in the next meetings of the ECB. Where there are doubts, some news about their real monetary policy intentions may appear. With which you can apply some strategies in your stock market operations. These are some of them,
Strengthen your positions in sectors most benefited from the rate hike. It will be the most effective measure that you can apply in the financial markets from now on. Where, it will be of vital importance that
Show one greater caution with your operations in equities, because generally a rise in interest in the markets is badly received by them. Especially in the days after the central banks make decisions.
There are always a series of financial products that are favored by these monetary actions. Especially, from investment funds. They are where you must pour all your actions to make your savings profitable with greater guarantees.
It may be the ideal pretext to go back to the usual banking products. Time deposits, bank promissory notes and even national bonds. Because in effect, they will increase their performance through these measures. With a fixed and guaranteed return on the savings that will provide you with greater security.
You must bear in mind that in these scenarios the inflationary process shoots up and therefore you will lose purchasing power with the profit you generate on your investments. It will not be as satisfactory amounts as before since it will be neutralized by the increase in prices in your main purchases.
In any case, a rise in interest rates it is not good news for your interests as a small investor. But on the contrary, it will generate greater instability in financial markets from the moment of its application.
It will be the most suitable time for readjust your investment portfolio. Through a thorough review of the financial assets in which you have open positions. You can replace them with others more favorable to these cycle changes in the economy.
As always happens in equities, the business opportunities they will also emerge in these new economic scenarios. You will only have to detect them to open positions in them and in this way you can achieve your goals more effectively.
And as often happens in these cases, it may also be time for you to take a few days of break in equities. With no other purpose than to check what the real evolution of the financial markets is during the next few days. This performance will be worth it.
Finally, you cannot forget that we are facing a cycle change as far as interest rates are concerned. And that you will have to do a lot with the degree of economic recovery of the main countries of the world. With variations in one direction or another and that will end up affecting the bags.