Fixed income was the best investment of the semester – Investments – Estadão E-Investidor – The main financial market news

  • In a semester marked by risk aversion, the main theme of the financial market was inflation and the price that world economies will pay to fight it.
  • Investors migrated from variable income to fixed income, the only asset class that achieved positive performance in the period. The scenario was worse for cryptocurrencies
  • For the second semester, it is necessary to prepare the portfolios for more risk aversion. With all the macroeconomic factors still at play, the volatility of the presidential elections is ahead.

Inflation. If it was not possible to escape the high prices during the trip to the supermarket or the gas station, it was also not possible to escape in the financial market during the first half of the year. The escalation of inflationary pressure around the world forced central banks to raise interest rates and generated a wave of risk aversion in world stock exchanges, bringing down the profitability of most of the investments.

A survey made by Yubb at the request of the E-Investor, shows that the fixed income was the only asset class that managed to deliver positive profitability in the first six months of the year. With the rise in interest rates, the assets were able to provide a higher return at a lower level of risk – for this reason, they can be considered the best investment of this first semester.

“We saw a significant rise in interest rates in Brazil, which ended up drawing the attention of investors who moved from variable income to fixed income assets. An attempt to capture less risky and volatile assets compared to investing in stocks, for example”, says Ricardo Jorge, fixed income specialist and partner at Quantzed, a technology and education company for investors.

Even benefiting from the increase in interest rates, fixed income also did not exceed the IGP-M (General Price Index – Market). The indicator is released monthly by the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV IBRE) on the level of economic activity and price variations in the country. Currently, the IGP-M is at 8.16% in the year, above the profitability of all investment classes analyzed by Yubb.

In a scenario of decline in variable income and challenging prospects for investments, fixed income assets such as CDB (Bank Deposit Certificates) from medium-sized banks and the Selic Treasury, which have a performance of more than 5% in the semester, were the most profitable so far.

Read more: BTG: with this Selic level, 65% of the portfolio should be fixed income

On the negative side, who pulled the devaluation line were the cryptocurrencies. Ethereum and Bitcoin, the two largest cryptos on the market, closed the semester with drops of 74.31% and 62.87% respectively, until 18:24 hours on Thursday (30).

With war, inflation and interest rates, and even a recession on the radar, crypto investors have seen equity melt. The scenario has been considered by the market as a new “crypto winter”, expression used to refer to long periods of consecutive declines in which assets are unable to rehearse a reaction. And winter should last in the short term, says Felipe Veloso, economist and founder of Cripto Mestre.

“We usually have a year and a half high to a two and a half year low. We can expect a low until October and then a sideways move until 2024, when a new bullish move should happen,” she says.

Between the end of fixed income and cryptocurrencies, the other asset classes also show a negative performance in 2022. In the variable income, the benchmark index of the Brazilian stock exchange accumulates a fall of 5.99% in the six months of the year. After a positive first quarter, when the Ibovespa detached itself from the international stock exchanges and gained an appreciation of 14.5%the months of April and June were negative, with enough devaluation to throw the accumulated for the year into the red.

“In the first quarter, Brazil stood out for the composition of the index, with a great concentration in commodities and large capitalization banks, the so-called value companies. In a global scenario of stress with the war, investors who were still looking for the stock exchange were looking for exactly these characteristics”, says Ricardo França, analyst at Ágora Investimentos.

The composition of the Ibovespa attracted a strong inflow of foreign capital, helping the index to reach the level of 121 thousand points in early April. Since then, however, the movement has not been repeated. “Foreign flow is what dictates the stock’s performance. If at the beginning of the year Brazil did very well, this is no longer a reality. The flow stopped, with the stock market being impacted by the high interest rate both here and abroad”, highlights Marcelo Boragini, specialist in variable income at Davos Investimentos.

The inflow of foreign capital into the country was also what helped the real to appreciate against the dollar, especially between March and April. In recent months, however, the trend has reversed, as interest rates have been raised in the United States, explains Marcos Almeida, head of WIT Exchange. “The flow of foreign investments has decreased in Brazil and, accompanied by the local scenario of inflation and fiscal uncertainties in relation to the upcoming elections, there has been this strong devaluation of the real against other currencies such as the dollar and the euro”.

Despite the American currency having returned to the level of R$ 5.23, with a high of 10.03% only in the month of June, in the first half of the year, the devaluation of the dollar against the Brazilian currency is still 5.69%.

The low flow of foreign capital and the recent appreciation of the exchange rate were a package that hit the stock market, but that is not exclusive to the Ibovespa. International pairs are also discounted since the Federal Reserve (fed, the US central bank) began the trajectory of rising interest rates in the US. It is a period of generalized bad mood, points out Ricardo França, from Ágora.

“Especially in the month of June, we started to see a more general bad mood, a doubt about American growth, China and the unresolved war. Added to this is a local concern regarding the elections and the country’s fiscal trajectory, which ended up impacting our stock market”, says the analyst.

In June, the Ibovespa had the biggest monthly drop of the year: 11.50%, surpassing the 10.1% devaluation in April, which had already been the biggest drop for a month on B3 since the beginning of the pandemic in March 2020. It is the worst performance for the month of June since 2022, when the index fell 13.39%.

Inflation and interest, the great villains

With risk aversion taking hold in the markets, it’s no wonder that even the most daring investors are migrating part of their portfolios to more conservative assets. But 2022 didn’t start that way, says Daniel Miraglia, chief economist at Integral Group.

“We started the year with good news about the Covid-19, milder variants and more vaccinated people. January and part of February were guided by this, giving hope that the supply shocks caused by the pandemic, which brought inflation up, would cool down. And then Putin invaded Ukraine,” he says.

At the end of February, with the outbreak of war between Russia and Ukraine, two major producers of commodities such as oil, corn and soybeans, global supply chains – which were already impacted by the pandemic – were again under pressure. This has generated a movement of high inflation that is penalizing economies around the world, including the most developed ones. Without the war in Eastern Europe being resolved, since April the market has started to price interest rates highest in the United States and Europe.

With inflation at 8.6% – the highest in 40 years – the Federal Reserve started the cycle of rising US interest rates. After two readjustments and with new highs on the radar, the country’s rate is currently between 1.5% and 1.75%.

“The first move in response to inflation was a rise in long rates, which had a negative effect on all valuations (assessments of the value of an asset) of listed companies, particularly technology companies, which rely on cash flow. longer. Therefore, the decline in the US began in Nasdaq”, says Miraglia.

Reflecting this, the Nasdaq Composite index had the worst performance of its history for a first semester, with a drop of 29.51%, according to a survey carried out by Einar Rivero, from TC/Economatica. With bags falling and interest rates advancing, the market began to price a scenario of recession in the US, which further accentuated the setbacks. And this became the main pillar of the financial market in the semester: inflation and the price that world economies will pay to fight it.

In Brazil, the monetary tightening started last year, which in a way shielded the country from part of the volatility coming from abroad. But not even the 13.25% Selic and the possibility that the Central Bank may already see the end of the cycle of high interest rates managed to stop the pressure coming from foreign markets. With risk aversion taking hold, Brazilian investors had a particularly difficult semester. To go through the period with greater security, fixed income must remain the star of investment portfolios.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

Check Also

FGTS: Caixa returns BRL 1,000 to workers who did not make the extraordinary withdrawal

Workers who did not rescue the values ​​of the extraordinary loot of FGTS (Fundo de …