Conversely, the slice of investors looking to reduce stock allocation rose from 7% to 16% during this period. Meanwhile, the percentage of people who do not intend to change their investments increased from 59% to 64% over the same timeframe.

Investor sentiment toward the stock market has deteriorated. The share of investors who gave a score of 7 or higher to the equity market fell from 65% last month to 54% this month. The average response was 6.2 in August, below the 6.8 from the previous month. On average, investors expect the Ibovespa to remain at the current level of 135,000 points by the end of this year, down from 142,000 points in the previous survey.

Concern about fiscal policy decreased from 47% to 41%, but remains the biggest risk to the stock market. Meanwhile, concern about unstable politics grew from 22% to 28%. Concern about geopolitical risks increased from 4% to 12%.

Many advisors indicated that changes in the commercial relationship between Brazil and the U.S. led to a more defensive positioning by investors: 49% reported an increase in Brazilian fixed-income investments, 29% in dollar-denominated investments, and 11% in defensive Brazilian stocks. However, 38% of advisors stated there were no significant changes in portfolios.

Fixed income continues as the most preferred asset class. The percentage of investors interested in fixed-income investments rose from 73% to 77%. In contrast, interest in stocks fell from 36% to 31%, while interest in international investments climbed from 42% to 48%. Multi-market (or hedge) funds and equity funds remain the investments with the lowest interest, at just 9% and 6%, respectively.

Long-term focus is key

Most specialists recommend increasing allocation to Brazilian stocks at this time only if the investor is focused on long-term gains and can withstand the volatility that tends to occur in the short term. They say the stock market is cheap and will rise, but the problem is that it’s uncertain when this rally will happen.

Despite caution with equity investments, several specialists advise adding higher yielding fixed-income investments to portfolios, such as prefixed bonds and inflation-linked securities, already anticipating the beginning of interest rate cuts next year. The expectation is that the benchmark interest rate, the Selic, will remain at 15% until the end of 2025, but fall to 12.50% by the end of 2026.

Prefixed bonds and inflation-linked securities carry higher risk than securities that track the CDI or Selic because their rates fluctuate more and may eventually cause losses if redeemed before maturity. However, they may provide higher returns if interest rates decline, especially for investors who wait until maturity to withdraw their money.

*By Júlia Lewgoy, Valor Investe — São Paulo

Source: Valor International

https://valorinternational.globo.com/