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By Alberto MATELLÁN, chief economist at MAPFRE Inversión
The dynamics of the financial markets can be reduced, simplifying greatly, to two main aspects:
- In the short-term, investment flows and liquidity are the kings. In a “classic” market, liquidity should be relatively constant, but in the real world, we could say that not only is this not the case, but in recent years, the liquidity provided by central banks has been critical.
- More in the long-term, the outlook for companies, and in particular, their earnings results, are the determining factors. Earnings can be understood universally as the difference between the return on capital invested (which in the long-term can be identified as nominal growth) and the cost of capital, i.e.,...
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