Anchor Markets Blog

Vaccine overdose

Written by Josep Duran | Jan 3, 2022 7:45:00 AM

The last part of the year has been busy for the financial markets. Omicron appearance took the market by surprise, which discounted a greater impact of the variant on the economy and on the companies.

The solution: third vaccines doses and new confinements, especially in Europe.

After a few days of uncertainty, the market is recovering from that pothole and has prepared to take off in 2022 with joy. However, some think that the worst (or best) is yet to come.

Pessimism: glass half empty

Pessimists will see multiples so inflated that not even good earnings growth forecasts justify it.

Fuente: https://www.multpl.com/shiller-pe

In turn, they are not convinced by the arguments given by central banks about the transitory nature of inflation. A prolonged instability of prices is detrimental for everyone.

To top it all off, the end of QE by central banks, known as "tapering", together with the three (for now) possible increases in interest rates in the United States, give more arguments to a scenario with high volatilities .

Optimism: glass half full

The optimists will cling to the good economic situation, where very good earnings growth is expected for next year:

Fuente: https://lipperalpha.refinitiv.com/wp-content/uploads/2021/12/TRPR_82221_625.pdf. ElaboraciĆ³n Propia Anchor Capital Advisors.

Also, the world is expected to grow in GDP by more than 4%, with China leading this growth (above 5%) and the United States and Europe close to 4%.

Both the micro part and the macro part would be good arguments to predict a good year in equities.

The problem is the price


Famous investor Peter Seilern says that the price is the last thing we have to look at when we invest. So far, he is doing great.


In contrast, value investors focus on price as the main factor, since they are able to give an estimate of how much an investment would have to be worth at today's prices.


However, if we take price out of the equation, both sides will agree that fundamentals are mostly good. The discussion is whether that price is enough to say it is a good investment. Either way, we will always have arguments on both sides.