Until the beginning of the year, the word inflation it was a bit vanished from the vocabulary of consumers. Despite the rise in food, which has been since 2020, there was an expectation that the price increase would end the year at 3.34%.
Since then, the water crisis has proved to be much more serious than previously thought, a frost has caused damage to plantations in the South and Southeast of Brazil, and commodities, such as the Petroleum, fired, which put pressure on the fuels. Added to this is the unstable political landscape. Summary of the opera: what we have today is an inflation that is beginning to generalize and worry economists.
O Focus Bulletin, which measures the consensus of the financial market on the main indicators of the economy, already points to a IPCA, the main index that measures inflation in the country, at 7.58%, well above the official government target (3.75%). In addition, at least three other major banks, such as Bank of America, Santander and JPMorgan, raised the IPCA to more than 7%, citing the saltiest electricity bill.
Therefore, investors need to take certain precautions so as not to see their assets deteriorate due to the price scale. O Money Times he talked to specialists to indicate the best investments to protect himself, and who knows, even gain from high inflation.
1 – IPCA+
Yes, the fixed income regained the spotlight amid economic uncertainties and the rise of the Basic Interest Rate (Selic), which today is at 5% but which already reached 2.5% at the beginning of the year and could end 2021 at 7%.
According to the fixed income head of Vitreous, Gabriel Mallet, at this time, fixed income is a good investment to protect against inflation and this turmoil.
“Fixed income is a safe haven because it protects against volatility and if you don’t sell before the maturity date, the return is guaranteed”, he says.
Within this universe, a role remembered by analysts was the IPCA+. This bond is inflation-linked, that is, the higher the index, the higher the profitability. In addition, the paper has a risk premium that varies according to the country’s economic scenario, recalls Gabriel Ribeiro, head of products at Messem Investimentos.
“For example, risk of fiscal rupture. This is a problem? Yes. So this prize increases. The worse the situation, such as the water crisis and the fiscal situation, the worse. Otherwise it is also valid: when there is positive news this premium decreases. What do we have today? It’s a worsening scenario with a pre-election period and water issues”, he argues.
Santander also indicates the IPCA as the title to have at this time, citing real profitability as advantages, that is, protected against a rise in the IPCA and compound interest, that is, the monthly return is automatically reinvested.
2 – CDBs
Investors also have the option to lend values to banks. Those Bank Deposit Certificates (CBD) ensure financial institutions close the day in the blue and finance their activities. In return, the banks return the money plus interest. And one more good advantage: CDBs can also be pegged to inflation.
According to experts consulted by the Money Times, bank certificates have paid good rates and are a great defensive option. Nevertheless, it is necessary to be careful with the lion: both CDBs and Treasury Direct bonds pay Income Tax.
Furthermore, Mallet says investors cannot lose sight of diversification. “In Brazil, it is difficult to know which way to go, so the best thing is to have a pre-fixed part, a part in the CDI and a share in the IPCA. You need portfolio diversification. If you put all your eggs in the same basket, they will break”, he argues.
3 – Debentures
In addition to banks and the Government, it is possible to lend to companies. According to Ribeiro, these bonds are linked to inflation and good options to diversify the portfolio. Another point is that in the case of incentive debentures, normally issued to finance large infrastructure works, there is an exemption from Income tax.
And yes, the small investor can participate. Before aimed at institutional investors, today there are debentures with an initial investment of R$1,000.
The analyst also recalls the importance of looking at the company’s private credit rating, which is issued by risk rating agencies, such as fit, Standard and Poor’s and moody’s. If it has a three-letter AAA rating, it means it has low credit risk. However, the liquidity of these assets tends to be lower.
4 – Actions
Even with the rise in the Selic rate, which somehow harms stocks, there are sectors within the Stock Exchange that benefit from the IPCA.
According to Victor Hasegawa, stock manager at Infinity Asset, companies with contracts indexed to inflation indicators tend to benefit, such as electricity companies and public concessions.
He also remembers supermarkets because of the skyrocketing food prices. “People need to eat. They won’t stop buying your basic basket. In food retail, the higher price generates greater revenue for the supermarket, improving the margin and profit”, he says.
André Querne, a partner at Rio Gestão, also mentions the electricity sector, especially transmission companies.
“Transmission companies are the ones that best protect themselves due to the low default rate. They are halfway between the generators and the distributors”, he points out.
According to him, the higher IPCA may cause an increase in defaults among consumers, in the case of distributors. The generators, on the other hand, are suffering from the water crisis that is plaguing the country.
Another sector remembered was banking, with higher interest spreads, and insurance companies, which were greatly affected in the first half of the year due to the high loss ratio. “Insurers get paid before they have to pay. As a result, they generate a lot of cash and this is applied in financial operations”, he recalls.
However, the analyst claims that the correlation is not 100% and that other factors are also at play. For example, rising interest rates can slow economic growth, hurting all businesses.
5 – Real Estate Funds
You real estate funds were greatly harmed by the crisis of covid, and part of them has not yet fully recovered from the fall. But this asset class is also a good instrument to protect against inflation.
According to Gabriel Teixeira, from Activates Investments, the investor, first of all, needs to look at the fund’s segment. “In the long term, mall funds and corporate slabs are able to protect themselves from inflation. If you compare the IFIX with inflation you can see this gain. But in shorter periods, it may be that total inflation is not passed”, he argues.
Both malls and corporate slabs still suffer from high vacancy, which makes the transfer of inflation to tenants’ rents more complicated.
“Funds need to negotiate with their tenants to keep them. Market conditions are not so favorable at the moment. Different scenario for the warehouses, where with the heated demand due to e-commerce, the owners are able to transfer the inflation values to the contracts”, he says.
For analysts Marcelo Serrano, Larissa Nappo and Marcelo Potenza, from Itaú BBA, paper funds can be a protection since if interest rates rise, yields on Certificates of Real Estate Receivables (CRIs) indexed to the CDI also grow, which boosts the returns on these quotas.
Bond funds are assets that invest in other real estate securities, such as CRIs.
In the case of brick funds, the trio claims that the manager is able to pass on the pressure on prices to the lessee through annual adjustments, increasing the value of the rent eventually even above official inflation.
“But for that to happen, the economy needs to be doing well, with heated demand for rental properties and more confident companies,” they point out.
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