Monday, March 4

Innovation, sustainability and private markets, Banco Santander’s commitment to invest in 2022

Santander Wealth Management & Insurance, the division of Santander Bank which integrates the investment fund management, private banking and insurance businesses, believes that for next year there are “interesting opportunities” on the stock exchanges and especially in the fields related to innovation, sustainability and private markets. According to the global head of this division, Víctor Maratarranz, “in an environment of transition and disruption such as the one we find ourselves in, active management takes on a special relevance”, and recommends adapting investments “identifying trends and sectors that benefit from the changes to optimize the profitability-risk binomial ”.

At Market Outlook Report 2022, recently presented under the title Investing in a world in transition, the entity sees likely that the stock markets register returns in the single digits (below 10%) in 2022, but clearly higher than the returns offered by bonds and liquidity. Within equities, the bank highlights the sustainability, since “regulatory and societal pressure requires a strong commitment to achieve the zero emissions goal. Sustainability is probably the trend and the most important opportunity on our investment radar given the impressive level of investment flows from the public and private sectors that are going to be channeled to optimize environmental factors ”. For this reason, they consider it very important to incorporate sustainability as a key factor in the construction of portfolios and to position themselves in companies with successful strategies to take advantage of the opportunities of this transition.

What’s more, Santander Wealth Management & Insurance proposes to value alternative investments to diversify and optimize profitability, such as private markets. “Investors are progressively incorporating these markets to expand the set of investment opportunities and capture the illiquidity premium. The flexibility of portfolio managers private equity Y private debt It allows them to exploit multiple opportunities in the market environment and economies in transition that we anticipate for the next few years. The low return on listed assets can drive investment in non-traditional assets, ”the report highlights.

The sectors linked to the innovation, with high growth rates and resilient margins. In this sense, it highlights issues such as cybersecurity, the energy transition, artificial intelligence or the internet of things. And others like the financial sector, “which is in a good position to take advantage of the foreseeable rate hikes”, and the health sector.

Macroeconomic scenario

Although earnings estimates remain strong, the report notes that a slowdown from the high levels seen in the first quarters of this year is natural.

According to the macroeconomic scenario drawn by the entity, growth will continue to be positive, although “increasingly complex”, as the markets face “a difficult transition towards an environment of higher inflation, lower growth and also less support from monetary policies”. Despite this slowdown, he expects GDP growth for the global economy above its trend level: 5% for this year and more than 4% for 2022.

The high level of savings accumulated by households during the pandemic, the good moment of the labor market and the positive levels of business confidence regarding investment plans can serve as a spur to economic activity. In his view, supply-side pressures should diminish in the coming months as semiconductor availability improves, transportation bottlenecks are resolved, energy prices decline and supply shortages are reduced. work is inferior.

However, the outlook is not without risks. Among them, the most contagious new variant of the coronavirus (Omicron), as well as a non-transitory inflation environment that stresses global interest rate curves. Negative scenarios that, although less likely, should not be ruled out. “We expect increases in interest rates, although lagged with respect to the increase in inflation, with the consequent negative effect on real returns on liquidity and high credit quality fixed income,” they explain. In its central scenario, the entity contemplates a higher level of inflation than in the pre-pandemic period for the next two years and the beginning of a moderate process of rate hikes (in the United States by the end of 2022 and in the area of ​​the euro by 2023).

Withtips to invest

The report includes essential tips for investing in this ‘transition cycle’, such as maintain the level of risk as long as the growth cycle continues. In this sense, they affirm that the recovery still has a way to go and it is still too early to underweight market risk in portfolios, despite the fact that the best moment of the cycle for the market has already passed. His proposal is to maintain the level of risk with a progressively defensive approach that could be reinforced in the event of an immune setback.

Also recommends manage the impact of inflation and seek real returns, exploring ways to diversify investments in search of protection against inflation itself. Another strategy is flexible investment in fixed income, due to the need to be prepared for volatility in the bond markets. “We maintain our preference for credit risk (corporate defaults are expected to remain very low), but we anticipate the need to pivot towards other types of risk as the cycle progresses and spreads tighten,” they say.

Finally, they advise select companies with the ability to defend profit margins (Among the most favored, he mentions those companies with the power to set prices and the ability to pass on the highest costs to the consumer) and incorporate alternative investments to diversify and improve profitability to those currently contributing traditional assets.