How may I safely protect my money?

Now that inflation is evident, so is the damage to savings. If we don’t make our money work for us, we can buy less and less. Economists expect interest rates on deposits to rise, but my doubt as a financial adviser is whether these rises in nominal returns (without taking inflation into account) are going to satisfy the appetite for real returns (incorporating the calculation of inflation ) and when they will.

As there are so many people, at the moment, with savings for emergencies, the channeling towards investment is in doubt. In addition, a lot of debt has been used to finance expenses and investments in the heat of the health crisis in recent years. With an SP500 hitting new lows and interest rates rising significantly, productive investing is suffering. The preference for liquidity, for cash, has skyrocketed.

Deeply indebted states must pay more and more for that accumulated debt. Without being used to such payments and with deficits that make it difficult to obtain new financing, the displacement of private investment towards the financing of public spending seems more than worrying.

There are no clear signs of capitulation yet, we do not see a bearish end-of-cycle pattern. And we should pay attention to the following:

Federal Reserve pivot, going from selling bonds to buying bonds.

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Reduction of unemployment (which has not yet risen as indicated by multiple economic models).

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Reduction in risk premiums (which remain at relatively moderate levels). Both in corporate debt and public debt.

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Cryptocurrencies can follow a rhythm that is not strictly dependent on the factors mentioned. But we do have to keep these ideas in mind, because the when is more unpredictable than a logical chain like the one presented above. In addition, the asymmetry will be very relevant, as it was in the recovery of house prices in Spain during the second decade of this century

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We focus a lot on the Federal Reserve because it is the one that is giving savers incentives to go back to that “safe” reserve. Although the incentives to save are not the priority in terms of narrative. That is why we have previously talked about the Dollar Milkshake Theory: when dollars are accumulated to repay debt, assets are shredded to pay off debts. And the dollar is the center when everything begins to liquidate, so it tends to rise when a recession occurs.

And what do we do?

React. Just as if we have a toothache we go to the dentist, if we are not able to protect our money we must seek professionals. Both for independent advice and to decide which products can best fit into our portfolio. At Belobaba we know that our main strength is delegated, professional and regulated management to protect the purchasing power of our clients.

There are more ways to protect our assets and more considerations to take into account. We’ll look at it in detail during this series.