Selec rise and uncertainty broaden fixed income advantage; See what is produced more – 9/22/2021 – Market

As expected by most markets, the BC (Central Bank) this Wednesday (22) raised the key interest rate, Selic, by one percentage point, to 6.25% annually. The cycle is expected to last at least as much as 8.25% at the end of the year, to reach 8.5% in 2022, according to forecasts in a Focus report compiled by the monetary authority.

With economic and political uncertainty in Brazil expected on the horizon six to twelve months ahead, investment managers and analysts have recommended that investors pay more attention at this time to alternatives with wage levels that are already very attractive in fixed income, either through public bonds or issues own.

In the case of the stock market, the forecast is not very optimistic, although the investor can find profitability by betting on stocks of strong companies and strategic sectors of the economy, which are less susceptible to fluctuations.

Patricia Palomo, Partner and Investment Director at Sonata Wealth Manager, advised clients to migrate part of the portfolio risk in equities and multi-market funds to alternatives that are more attractive today in fixed income.

“In a period of greater uncertainty, we need to prepare portfolios for any scenario,” says the expert, noting the risks related to the country’s financial and political discussions, which she believes will continue to exist in the coming months.

In this uncertain macroeconomic environmentLeon Abdallah, investment analyst at Rio Bravo, says that although the stock market already looks at an attractive entry level, it could get cheaper.

“The projected scenario for 2022 tends to be more complex for equities,” Renato Everson, asset manager Thaler, stresses, adding that the global environment also brings its risks, with a possible drop in stimulus in the US and a slowdown in China.

For investors with a more moderate profile, Taler’s manager’s recommendation is to focus the portfolio on fixed income at this time.

There is a consensus among professionals that with a lot of uncertainty on the radar, it is already possible to find low-risk investment options in the fixed income market, with good returns and lower volatility.

Government bonds traded through the Treasury Direct, especially those that offer a higher yield than inflation, currently around 4.5% for maturities of about five years, are viewed with good eyes.

“These are very attractive rates, the fixed-income time is very good in Brazil, and even if we consider that many countries offer a negative real return,” Abdullah says, adding that the bond rate of return at that time would be guaranteed to take place until the end of the maturity of the asset.

In the meantime, there may be volatility, even if it is a fixed income asset, he asserts.

For investors with a more conservative profile, the analyst highlights good opportunities in post-constant Selic Divergence sovereign bonds, which should yield increasing returns as monetary policy tightens. It is possible to purchase these securities, known as Tesouro Selic, through the Tesouro Direto platform.

“A return of more than 8% next year, compared to what the market expects for the Selic rate, is very interesting, especially for those who don’t want to take political risk in an election year, when things are rocking even more,” Iverson says.

In private fixed income, incentive bonds, as well as structured credits via certificates of real estate (CRI) and agribusiness (CRA), which offer exemption to individuals, are mentioned among the main options available in the market.

“In many cases, they are top-tier companies, and a leader in their markets, taking advantage of a moment of increased demand for fixed-income assets to issue debt,” says Sonata’s Patricia.

It says it looks favorably at private issues that have been brought to the market with bonuses of up to 5% real interest (above inflation) per year, in assets that are exempt from income tax for individuals. “They are excellent alternatives to building heritage.”

Abdullah, from Rio Bravo, highlights infrastructure, within the private fixed income issues sector, as a pocket of opportunity that should be part of the opportunity radar for investors.

“There are quite a few advantages to give to this government, but I think one of them is in infrastructure, which has been a very successful year, with auctions for airports, highways and railways, with 5G expected by the end of the year,” says the investment analyst.

The heating up in the sector, says Abdullah, is reflected in companies’ desire to take debt from the market, for example through incentive bonds. He says these are issues where an investor can find a yield differential on inflation-linked government bonds of around two percentage points, for investment grade rated issues and maturities of five to ten years on average.

Despite the most favorable view of fixed income, the director of Sonata It also states that the recommendation is not that the investor take all the money he has in the stock..

According to Patricia, some companies with shares on the stock exchange, especially those that are leaders in their sectors, have managed to overcome the difficulties imposed by the pandemic better than their peers, and should continue to deliver strong results in the issued quarterly balance sheets. to the market.

“We have seen many companies surprise market analysts with more positive results than expected,” the expert says. It adds that some sectors will be more resilient than others in terms of uncertainties in the expected local and global scenario for the coming months.

In the face of signs of a slowdown in China, the investment manager believes it makes sense for investors to reduce exposure to companies that export goods, and to give greater focus to companies with a domestic bias, which are able to pass on the high rate of inflation to consumers. .

She points out that large supermarket chains and sanitation companies are less sensitive to the pace of economic activity, as are electricity transmission companies.

Patricia also claims that the financial sector, such as banks and insurance companies, which are benefiting from the increase in interest rates being rolled out by British Columbia, and that she believes the market has somehow left in recent months, could also make up the portfolio space for variable income.

For an investor who chooses greater exposure to higher-risk assets, Sonata’s principal says it’s always a good idea to have some money in dollars or gold, known for the protection they offer in times of increased market stress.

“Furthermore, having a portion of the portfolio invested in global markets, in economies and sectors that do not have any kind of relationship with what is happening in Brazil, is essential in looking for a diversified portfolio that seeks the best risk-return ratio,” says Patricia. .

Iversson, of Taler, says investors can find good opportunities on the stock exchange at current levels, but it is necessary to have an investment horizon of at least two to three years.

In the short term, Director Taler expects that stocks in general will be under high volatility in the expected uncertainty environment due to the elections and the external scenario. “If the controversy in 2022 is fierce, it is even more difficult for us to see the stock exchange doing well,” Iverson says.

Data from Anbima (Brazilian Association of Financial Entities and Capital Market) shows that in August, equity funds halted the monthly positive balance sequence that began in February of this year, with a net outflow of R$176.1 million last month. On the other hand, fixed income funds generated net inflows of R$41 billion in this period.

Within fixed income, the most conservative emerged, represented in the “low sovereign term” sub-category, with financing of R$25 billion. These are funds that invest a large part of the resources in assets linked to DI (Interbank Deposit) or Daily Selic. “These results reflect the combination of the interest rate hike cycle with greater risk aversion on the part of a large portion of investors,” Anbema says.

Only bonds with incentives that exceed inflation

Forecasts by investment researcher Yubb considering a 6.25% ratio indicate that among fixed income investments, only incentive bonds will have a real return, that is, higher than inflation.

The estimated inflation rate for 2021 is 8.35%, based on a Focus report released on September 20, 2021.

Even income tax-exempt investments, such as incentive bonds, will not reach real income, such as LCAs and LCIs.

For the calculation, the survey takes into account an average return on assets and a 20% income tax rate, indicating maturities between 181 and 360 days.

The worst investments, according to Yubb, are CDBs (certificates of deposit bank) of major banks, which will have a negative real return of 4.07%.

(Colton Castellani Collaboration)

How are the investments

* Exempt from income tax