Ana Sepúlveda
Client Portfolio Manager
Fintual México


Startup Contributor

Driving Through the Financial Markets

Mon, 06/27/2022 - 11:00

Since 2022 started, we have all experienced five months of high volatility and unpredictable financial markets. If you are 35 or younger, you have probably been spoiled by the exceptional —and unusual — bull market over the last decade and you are certainly unfamiliar with a real financial crisis.

And yes, it is spoiled: we have seen our investment accounts grow, even during a two-year pandemic: a quick drop on the S&P 500 followed by monster gains, which resulted in double-digit growth in 2020 and 2021.

And now, even though we are not currently living through a real financial crisis, we are going through a rough patch that most of us have never experienced.

During this investment fairytale over the last few years, we have seen people with no knowledge of investing and without making the right assessment of the risks involved, opening accounts and investing in every single risky asset they could find: stock markets, crypto, NFTs; most of them encouraged by stories from friends or of someone becoming a millionaire overnight by owning some of these assets.

Since the start of the year, we have seen a sharp decrease in risky assets. Top names in the stock market, such as Amazon, Meta and Tesla, have fallen on average 34 percent; Bitcoin is down 40 percent and the list continues. The lesson learned is that nothing lasts forever and there is a risk behind every investment.

What is behind the synchronized sell-off in the markets? There are plenty of factors: geo-political risk, mainly due to the war between Ukraine and Russia, and China’s Zero COVID-19 policy, which are both putting pressure on the supply-chain side of the equation of inflation, making it really hard for policymakers to bring down inflation around the world, and most of all in the US.

Going a little bit deeper, from the start of the pandemic, central banks reduced interest rates to stimulate the economy; usually when this happens, we start seeing a higher demand for goods and services, pushing inflation higher. So, part of this peak of inflation was created by the Fed's current accommodative policy.

But we also have, as we just mentioned, supply-chain constraints, which have exacerbated inflation levels, making it harder for policymakers to bring down inflation, which now is being done by increasing interest rates. If you are following me, you can see that the main problem here is that increasing interest rates brings down inflation but also slows economic growth.

I don’t want to get too technical but the market is scared of the Federal Reserve not being able to control inflation and that increasing interest rates will leave us in a recession.

With this market sell-off, retail investors are questioning their somewhat irrational investment and we are seeing the need emerge for investment platforms that, more than giving you access to these risky assets, can guide you through the right assessment of your financial wealth. In other words, a wealth management platform that will help you grow your wealth and one that will also become a place where you feel safe even in troubling times.

Nowadays, you can find no more than a handful of platforms with a low minimum initial investment that can give you access to financial markets.

However, the main question is: How many platforms are available to Mexican investors that can offer not only access to the financial markets but also access to an investment team that can help you navigate through these volatile and unpredictable markets?

Fintual is that platform. We focus on long-term wealth creation through quantitative risk-optimized portfolios that are aligned with your goals. We redefine investments, making them simple, transparent and accessible for everyone. Our main goal is to help you invest your savings, manage and grow your wealth while showing you how to do it and helping you make it a habit.

An easier way to understand the difference between Fintual and any other investment platform is to think of a 14-year-old who is eager to drive but hasn’t yet had driving lessons. Suddenly, on his birthday, he is given the keys to a brand new Ferrari. He turns it on and drives fine for about a block or two but as soon as he gets on the highway, he starts driving at 200kph and crashes.

Now, think of the same 14-year-old but on his birthday instead of giving him the keys, Checo Perez knocks on his door with that same Ferrari and drives him around at 200kph; this is Fintual.

Having said all this and though we are not fond of the current unpredictable markets, it is common and it does happen. Just like a financial crisis, which most haven’t experienced, it is something that sooner or later will be experienced.

The only good thing about volatility in the markets is that people get more serious about investing, finding the right place to put their savings and managing their wealth. Maybe that place is a place where — like the word says — you take care of your wealth.

Photo by:   Ana Sepúlveda