The month of September closes with an increase in the CPI of 4%, according to the leading indicator offered by the INE. These levels are very significant as they represent the highest levels since September 2008, the protagonist being the rise in the price of electricity.
As we have explained on previous occasions, the increase in electricity prices would be associated with the increase in gas and, in turn, with the rise in emission rights as a result of the ambitious battle against greenhouse gas emissions.
Another factor to highlight for the rise in prices is based on the sharp price drops that showed throughout the summer of 2020, many service activities that require a high degree of social interaction such as the hotel and leisure sector.
Throughout 2021 a marked acceleration of industrial production prices is observed in Spain, with special intensity in the case of the manufacturing prices of some intermediate goods in the branches of metallurgy, basic chemistry and the paper industry.
At the same time, we see inflationary pressures observed on a global scaleAs a result of the recovery in demand that has led to the so-called bottlenecks in supply due to the increase in production costs due to the increase in the price of raw materials. Input supply problems have been generated in sectors such as semiconductors, chemical products, plastics, wood or industrial metals.
This problem joins the tensions of the Marine transport And, because the Eurozone is strongly dependent on the import of raw materials and intermediate goods in its production processes, there are situations of shortage of basic components, which is preventing the supply from meeting the demand in the terms acquired.
The current price levels are of utmost importance for Spanish households because the possible degree of persistence could show, in the future, a loss of purchasing power of disposable income and a much more restrictive monetary policy to try to contain the rise in prices.
The investor is trapped
If the purchasing power of our income is affected by rising prices, our heritage follows the same line.
We might think that given the attachment of Spanish to home ownership, we are covered. A reflection that is partially true because house prices have increased by 4% since September 2020 up to current levels (data from Idealista portal). Although it must be clarified that these increases tend to move the cadastral increases for the increase in the IBI payment that affect our income.
But the real problem of the rise in the CPI is found in Spanish savers who are generally positioned as conservative profiles. The reality is that deposits do not offer anything and the Spanish ten-year bond offers a return of 0.46%, that is, a real return of -3.54%.
From the end of August to the present, we have seen the increase in the profitability of the Spanish 10-year bondIn line with what happened in the sovereign debt markets of advanced economies, in this case, the yield differential of the Spanish 10-year bond versus the German, the risk premium, has managed to rebound from the 3 basis points that I show at the end from July to 64 basis points.
This is the reality of the conservative investor … either accept the actual loss or increases your risk to try to capture potential returns on your savings.
In this case, surely we would look at weighting the portfolio in equities that is very high… the S&P 500 Index has risen 3.4% since the end of June and reached new all-time highs during the quarter, with valuation ratios out of orbit.
In the same period, the Euro Stoxx 50 has risen by 3.1%, while our Ibex 35, which is still below its prepandemic levels, has shown a slight decline, conditioned by the negative impact that the expansion of the delta variant of COVID-19 has had on companies in the leisure and tourism sectors, which have a comparatively high weight in the Spanish index.
Our savings do not generate anything in the bank, investing in government debt we accept the real loss and our stock market is one of the laggards on a global scale with little growth potential, since they overweight companies of the 20th century, of the old economy. Definitely, Spain would be worse positioned than most of the countries.