The uncertain context sets the tone for the financial market at the start of the semester. In Brazil and abroad. Historic losses in the US stock exchanges in recent months and not so much on the Brazilian stock exchange do not guarantee a reshaping of the indices, not least because the main driver of the decline in stocks is present and strong: interest rate.
In Brazil, another 0.25 or 0.50 percentage point rise is confirmed in Selic, today at 13.25%. In the US, through the end of the year, the base rate may double from the 1.50% and 1.75% range. In Europe, the adjustment begins this month at 0.25 points and must be repeated in September.
This is the general scenario, but the macroeconomic perspective is at an inflection point, assesses Marco Freire, Partner and Director of Multiple Markets at Kenya Investments – Director with R$62.3 billion under management.
We cannot confuse structural issues with economic cycles. They still exist as we begin a downturn for the global economy. Warn of an “inflection point for fears,” Freire says, we’ll have an industrial recession and an economic recession.
Kinea estimates that US inflation, from 8.6% year-on-year through May, will be 3% to 3.5% six months from now and that the industrial recession will spread to other sectors.
“We won’t necessarily see a global recession, but Vladimir Putin has checked Europe, which doesn’t know how to get out of this situation that means we’re running out of Russian gas,” Freire says. Without a way out, European GDP could fall by 2% to 3% next year. We should also consider that it won the aid package sponsored by Joe Biden last year and without any prospect of renewal and that China has problems with Covid.”
For the manager, the dollar will remain strong abroad, the stock market will continue to fall and interest rates – which are still high in the second half of the year – will fall even more.
“In Brazil, investors will continue to move from stocks to fixed income, but I don’t think this movement should happen. Investors should take advantage of lower stock prices and buy stocks. It is necessary to stop looking in the rearview mirror and start looking ahead.” , says Freire, which Brazil will have moments of greater volatility with polarized elections without a financial anchor.
“Brazil has benefited from higher commodity prices, but has already spent everything on fuel, electricity and telecommunications relief measures, now in the congressional approval stage, with the increase of Auxillo Brazil, the new value of the Valley of Gas and helping truck drivers and taxi drivers,” he said. Says. “We could have passed the election in a much better position, but the boat is lean here. We are more fragile.”
André Kitahara, Macro Portfolio Manager at A to Z QuestGrupo Azimut assesses that inflation and the central bank crusade that drove interest rates, the main factors that catalyzed the decline in stock markets, are present and will continue.
The fact that the central bank has been a pioneer in promoting monetary tightening gives Brazil some advantages, says the economist at AZ Quest, which has 20 billion Rls under its management, but it does not change the central scenario.
It all depends on inflation. The migration of investors from variable income to fixed income occurred because the real interest rate became attractive, but this was not always the case. In some time windows, interest has been negative,” he says. “But the real 6% gain, which we get today in NTN-B, can withstand some humiliation,” adds the director, who does not see the possibility of the Brazilian economy registering growth Good at an interest rate of this size.
For AZ Quest, low growth and high interest rates are winds against the stock market. We will also have the October elections, which will add volatility in the markets. And the sooner we emerge, especially in terms of the next government’s fiscal policy, the better, says Kitahara.
He chose inflation as the main variable to be monitored by investors in Brazil and abroad. “The stock market is an asset class and the market is too globalized. Therefore, we need to follow the major markets and not just the Brazilian,” he points out.
Luis Cedrani, investment director at BV Asset, with management of R$49 billion, cited majority elections in Brazil as a relevant variable to watch and be added to others with unknown outcomes, but affecting markets.
Will the Fed raise interest rates further? Will there be a recession? Will there be more lockdowns in China? How will the Chinese government deal with the new waves of Covid? “We don’t have answers,” he says.
Little Sedrani Newvid That first semester was tough on the markets, but notes: “We knew from the start that higher interest rates could increase the value of the real, as it did. But a lot happened in that period. Commodities went to the moon, war broke out and the Fed raised rates. The benefit is more than expected.
He cites that the (negative) performance of stock markets has been historical and has come with an increase in interest rates, but the economy has not yet slowed. So we have to wait because the repercussions will come. The US and global scenario will affect the flow of capital to Brazil and emerging markets as well as commodity prices.”
Like his peers, Sedrani estimates the Brazilian stock market is cheap, compared to Selic’s rate of over 13% and a real interest rate of 6%. He warns that this market scenario is not sustainable. However, BV Asset manager does not see a price correction at this time.
“In a more positive context, the stock market is light and may rise quickly, but money will continue to flow from variable income because of the higher interest rate,” he says. “Going forward with the electoral calendar, from August onwards, candidate demonstrations will enter asset prices.”
Despite the potential for greater fluctuations in stock prices, Sedrani has a positive outlook for companies in Brazil. He points out that companies have low leverage, employment data is improving and newly approved government and congressional aid should carry resources for consumption or debt repayment. “This is positive for companies,” he assesses.
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