The ruling through which Judge Loretta Preska ordered Argentina to deliver 51% of YPF's shares had a strong impact on the share price of several domestic companies. However, the generation of uncertainty can be multi-causal, and is not exclusive to these lands.
Throughout history, numerous episodes have disturbed the tranquility of the markets. Events as varied as the oil crisis, the flash crashes of 2010 and 2015 and the Covid-19 pandemic alsosharply affected global stock markets.
In view of some of these events, the VIX index, which measures expected volatility in the short-term market, reached 80 points. Even future sectors, such as technology, coexist with a considerable degree of instability in stock market terms.
In such situations, global markets always react in the same way: with fluctuations.
From Wall Street to the Asian stock exchanges, stocks oscillate between sharp falls in times of recrudescence and slight rallies in the face of a possible solution.
VIX index after Judge Preska's ruling against YPF
This attitude is easily calculated from theVIX, also known as the "fear index". In the case ofthe recent Preska ruling, the markets maintained their conservative logic.
Not only did the value of the oil company's shares plummet, but the shares of other domestic companies also fell sharply.YPF shares lost 5.6%, and the S&P Merval index fell 2.7%. Indeed, this is how the financial market works: when one stock catches a cold, the others catch a cold.
The historical response of investors to these cases is, logically, the migration towards safe options. Capital tends to be protected in traditionally reliable assets such as gold, and to diversify its portfolio in alternative items such as real estate (mainly commercial real estate, which usually generates higher yields than residential real estate).
This time was no exception, and the scenario of uncertainty motivated investors and businessmen to take refuge in the dollar, which surpassed $1,200 and reached its highest point since the end of the cepo.
Clearly, the unequal relationship in terms of desirability between financial assets and so-called safe assets tends to stabilize as the global context normalizes, whatever the trigger of instability. However, history shows that crisis situations occur, for one reason or another, every few years.
What to do to ride out market volatility cycles
Therefore, the key to avoid shocks is to generate a diversified investment portfolio. It is not a matter of abandoning bets on the performance of market stocks, but of avoiding putting all your eggs in one basket.
Strong assets are critical to protecting wealth over the long term, and it has even been shown that those who allocated at least 20% to alternative assets doubled their returns over traditional portfolios.
Historical experience shows that,in certain scenarios, capital tends towards cowardice and prudence. But this is not a sign of weakness, but of intelligence.
The good investor must know how to protect himself in tumultuous times and move forward at the right time. Only those who understand this formula will have lasting success in business.
Source: Profile
Marcos Victorica is Founder and CEO of BAS STORAGE.
Company that is revolutionizing the American real estate market by creating a product based on the American economic infrastructure.