Since 2020, due to the Govt-19 epidemic, global economies have begun to suffer from imbalances in global production chains, which have been exacerbated this year by the war in Ukraine. As a result, food, energy and commodity prices began to rise and global inflation soared.
Until the middle of last year, the understanding of the market was that this rise would be a shock, a temporary inflation. However, this view has changed with rising inflation data in recent months.
According to the US Department of Labor, prices rose 1.2% in March and 8.5% in 12 months, the highest level since December 1981.
However, in addition to the global problems, the world’s largest economy suffers from the effects of monetary incentives provided by the government during social isolation. There, many no longer wanted to work and had to raise salaries to create glamor.
“The Core US inflation pays and it has risen about 6%. It creates inflation and causes more inflation than unemployment, “said Marcio Fondes, manager of Asa Hedge in Stock Pickers’ Episode 143.
In this context, Bruno Pires, who conducts research on Moat Capital’s, points out that at such times, it is normal for the economy to go into recession. This is because, with high inflation, the Federal Reserve (US Federal Reserve) will have to raise interest rates, which today control the rate to 0.25% to 0.50% per annum. As a result, economic activity declines.
“The Fed is signaling that this system can change the situation without a recession, but the market is skeptical about it. It has increased the risk of a recession in the short term,” he told Stock Pickers.
According to the Asa Hedge Manager, US interest rates are expected to rise to 6% per annum, but the Fed is now signaling lower than that, around 3%. According to him, it shows how the US currency is “behind the curve” and how the economy should be affected in the long run. “We can say we’re far from equilibrium and we need to raise interest rates fast,” Marcio said.
Technology sector stocks
In times like these, the chances of higher inflation and rising interest rates are often a sector technology that is penalized. The trend is that as the market value of most of these companies is projected for the next few years and the rate hike slows the economy, so will the growth of these companies.
In addition, stocks of the market-loving sector in 2020 and 2021 now find themselves in the opposite situation. “Technology firms need to watch rising interest rates more closely. We are taking steps to be more defensive in our portfolio. We are in a critical situation and will prioritize companies that can change prices,” said Jenny Lee, XP Investments’ stock strategist at Stock Pickers.
According to her, The P.D.R. (Brazilian Depository Receipt) Kraft Haynes (KHCB34) Is included in the broker recommended portfolio for this reason. Nevertheless, Jenny points out that the technology sector has not given up well and recommends some more semiconductor and cyber security measures. “They’re long-term studies, and in the short term they suffer a bit, but for now they’re a good entry point,” says Jenny.
Byrne, from Mod Capital, says investors who want to stay in the sector should look for shares in companies with cheaper folds. According to him, activities like Apple (AAPL34) And Amazon (AMZO34) Even if companies report big profits, there is no value at this point. “You have to trust the permanence of these numbers or at some point you will gain functional ability, but in this whole situation it is complicated,” he says.
For more on experts’ view of the current moment of interest rate hike in the United States, see Stock Pickers Episode 143 below:
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