Inflation will challenge investors in second half of year
Investors struggled to see good results in their portfolios during the first half of the year amid soaring inflation and interest rate hikes in Brazil and abroad. Stock market indexes and equity funds were, in general, in the red. In the fixed-income segment, assets linked to the Selic, Brazil’s key interest rate, and to the interbank benchmark rate CDI have accompanied the increase in the benchmark rate. Yet, on average, fixed-rate government bonds and long-term, inflation-adjusted securities still lag behind the inflation projected for the period from January to June, of 5.6%.On the winning side is the IMA-B 5, which represents a basket of Tesouro IPCA+ (Treasury bonds) with terms of up to five years and is up 6.61%. Hedge funds, which saw withdrawals of R$61 billion this year through June 27, have also proven that, on average, managers are able to extract good results even in the most adverse environments, with an appreciation of up to 11.31%, according to data from Anbima, the association of securities firms.The Ibovespa, Brazil’s benchmark stock market index, is below the 100,000 points threshold and lost 11.5% in June alone - and is down 6% in the year. Other stock market indexes show similar performances, while the foreign exchange rate is up 10.1% in June and down 6.1% in the first half of the year.The U.S. Federal Reserve acknowledged that inflation is not a temporary phenomenon and requires tougher tightening policies, which partly explains the recent gloom after the worst period of the pandemic. With the recession in the United States weighing on investors’ projections, stock market indexes suffer substantial losses amid a bear market and a sell-off. The prolonged Russia-Ukraine war represents an additional shock to the production chains and has imposed pressure on price indicators."The fable told is that everyone knew the United States was going to raise interest rates, but last year, in a way, the market had bought into Fed’s own fantasy that it wasn’t behind the curve and wouldn’t have to raise interest rates or withdraw stimulus," said Rogerio Pessoa, a partner and head of wealth management at BTG Pactual. "When the Fed acknowledged that inflation is not transitory and accelerated the pace [of interest rate hikes and reduction of asset buying], it caused some disarray."The executive says that global inflation is, in fact, unchecked. The expectation of normalization of production chains in the post-pandemic did not...
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