{"id":93640,"date":"2025-04-07T12:35:14","date_gmt":"2025-04-07T15:35:14","guid":{"rendered":"https:\/\/murray.adv.br\/?p=93640"},"modified":"2025-04-07T12:35:19","modified_gmt":"2025-04-07T15:35:19","slug":"santander-moves-to-defensive-stance-on-global-assets-amid-u-s-tariffs","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/santander-moves-to-defensive-stance-on-global-assets-amid-u-s-tariffs\/","title":{"rendered":"Santander moves to defensive stance on global assets amid U.S. tariffs"},"content":{"rendered":"\n
Economist sees unprecedented shock increasing global uncertainties with repercussions in Brazil<\/strong><\/em><\/h6>\n\n\n\n

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04\/07\/2025 <\/p>\n\n\n\n

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Santander Asset Management<\/strong> has adopted a defensive stance on global assets and is taking a tactical approach to domestic markets amid heightened uncertainty prompted by the \u201cunprecedented shock\u201d from the sweeping tariff hike<\/a> announced by the United States, said Chief Economist and Strategist Eduardo Jarra. In an interview with Valor, Mr. Jarra expressed concerns about the potential impact of the tariffs on global economic activity and noted that repercussions could be felt in Brazil\u2014possibly leading the Central Bank to end its interest rate tightening cycle earlier than expected<\/a>.<\/p>\n\n\n\n

The following are key excerpts from the interview:<\/p>\n\n\n\n

Valor<\/strong>: What\u2019s your assessment of the global outlook now that the Trump administration has announced new tariffs?<\/em><\/p>\n\n\n\n

Eduardo Jarra<\/strong>: We\u2019re dealing with a situation that has no recent historical precedent. Typically, in our analysis, we rely on past events as a reference to understand how markets and economies might react. This time, there\u2019s no roadmap; we\u2019re operating on assumptions. We had marked April 2 as a key date to get more clarity, but the announcement surprised markets with its scale and timing.<\/p>\n\n\n\n

Valor<\/strong>: What kind of tariff levels had you anticipated?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: Like most of the market, we were expecting something in the 10% to 15% range. Therefore, the announcement was surprising not just in terms of size but also in terms of the rationale behind it. By April 2, the picture was very different from what we had imagined. At least we now have clarity on what the tariffs look like. The uncertainties now revolve around how other countries will respond and whether there\u2019s any room left for negotiation. That has left us in a highly uncertain environment, and we\u2019ve adopted a more defensive management stance. We\u2019ve shifted to a defensive management mode.<\/p>\n\n\n\n

Valor<\/strong>: Has Santander Asset shifted to more defensive assets?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: I\u2019d say we\u2019ve moved toward more defensive positioning rather than specific defensive assets. Given that we saw this as a significant event, we had already begun reducing risk across portfolios. After the announcement, we still believe that de-risking was the right move. We\u2019re now navigating more uncharted territory. China responded with a 34% tariff on U.S. goods\u2014a strong reaction that immediately impacted markets. We\u2019ll have to wait and see how the U.S. responds. Is this the end of the escalation or just the beginning? Given the magnitude of the U.S. tariffs, is there still room to negotiate? In an environment with this much uncertainty, we believe the prudent approach is to wait, digest the information, and observe how key players act. It\u2019s too early to take positions based on hypotheticals.<\/p>\n\n\n\n

Valor<\/strong>: Can we already assess any concrete economic impact from the tariffs?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We knew that a tariff shock would likely lead to slower growth and higher inflation. Now, we\u2019ll try to gauge the magnitude of those effects. The problem is that we still don\u2019t have a full picture\u2014retaliatory measures from other countries are still unfolding. U.S. inflation will rise as import prices climb. However, the spike in uncertainty is also likely to make companies pause investment decisions, possibly leading to reduced capital expenditures. Consumer purchasing power will also be hit. On top of that, we need to consider the impact on financial markets since a significant portion of Americans\u2019 savings are in equities. And don\u2019t forget supply chains. What does this disruption mean for corporate production structures? That concerns me more than inflation.<\/p>\n\n\n\n

Valor<\/strong>: Could the U.S. be heading for a recession?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: The probability has increased. We need more data to know how much more likely it is now, but yes, the risk has risen. The real question now is how severe the U.S. slowdown will be. If conditions remain roughly as they are, I believe the focus will shift more toward growth concerns, which will eventually lead to rate-cut discussions.<\/p>\n\n\n\n

Valor<\/strong>: Have you changed your outlook for Federal Reserve rate cuts?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We were projecting two 25-basis-point cuts this year and two more in 2026. I\u2019m still comfortable with that forecast for this year. From here, the question is whether there\u2019s room for additional cuts in 2025\u2014perhaps bringing forward some of the easing we expected next year.<\/p>\n\n\n\n

Valor<\/strong>: How is your global portfolio positioned now?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We started the year optimistic about the U.S., driven by strong economic data and the tech sector. Even with elevated valuations, there was a compelling case for U.S. \u201cexceptionalism.\u201d However, with rising uncertainty around the U.S., and with fiscal stimulus in Europe and promising developments in Chinese tech, we began diversifying our global equity exposure geographically. Even before the tariff announcement, we were already becoming more defensive. Today, our global exposure is significantly lower\u2014neutral or close to it, depending on the portfolio. As we continue to assess the post-announcement landscape, we\u2019re maintaining that defensive posture and plan to revisit our strategy once things settle.<\/p>\n\n\n\n

Valor<\/strong>: Given the weaker U.S. growth outlook, are you allocating to U.S. fixed income?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: Not through a directional bet. That said, we\u2019ve been combining U.S. fixed income with our global equity risk bucket. We like U.S. fixed income as a complementary asset within our risk allocation framework, though not as a standalone opportunity. Our current stance is neutral.<\/p>\n\n\n\n

Valor<\/strong>: Does this defensive stance also apply to Brazilian markets?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We\u2019re also holding neutral positions across all asset classes in Brazil. However, we\u2019re actively managing the portfolios with a more tactical eye, looking for short-term opportunities. It\u2019s a tactical allocation strategy that remains close to neutral overall.<\/p>\n\n\n\n

Valor<\/strong>: The market had been concerned about a sharper slowdown in Brazil. Has that changed?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We still project 2% GDP growth for this year and 1.5% for next. The economy is generally unfolding as expected. The first quarter was strong, largely due to agribusiness, and the labor market remains tight, providing a tailwind. That momentum should moderate in Q2 as the agribusiness\u2019s impact fades. For the second half of the year, the restrictive monetary policy should lead to a more noticeable deceleration.<\/p>\n\n\n\n

Valor<\/strong>: Are any of the government\u2019s stimulus policies likely to offset this slowdown?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: We\u2019ve already factored in measures like expanded payroll-deductible credit and the proposed income tax exemption. Based on current information, we believe the Central Bank is nearing the end of its tightening cycle. The economy appears to be entering a gradual slowdown. If new data changes the picture, we\u2019ll reassess.<\/p>\n\n\n\n

Valor<\/strong>: Is there any bias in your GDP outlook?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: Given the current strength in the labor market and agribusiness\u2014and some uncertainty around fiscal stimulus\u2014the bias is to the upside. Two downside risks remain: first, the lagged impact of restrictive monetary policy; second, the global backdrop, which has become more concerning and could influence the Central Bank\u2019s decisions moving forward.<\/p>\n\n\n\n

Valor<\/strong>: Could that lead to an earlier start to a rate-cutting cycle?<\/em><\/p>\n\n\n\n

Mr. Jarra<\/strong>: Right now, we\u2019re more focused on the current cycle coming to an end. Given the global developments, the probability of ending the cycle with the Selic policy interest rate at 14.75% has increased\u2014this is our base case. If the global economy slows but avoids a more serious disruption, the external environment could help ease Brazil\u2019s economic deceleration. That would provide room for the monetary authority to hold rates steady at 14.75% or 15.25% and monitor the effects. In that scenario, the global factor could tilt the odds in favor of rate cuts starting in 2026. But as things stand today, Brazil still seems far from any discussion of an early start to easing this year.<\/p>\n\n\n\n

*By\u00a0Arthur Cagliari\u00a0and\u00a0Victor Rezende\u00a0\u2014 S\u00e3o Paulo<\/strong><\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Economist sees unprecedented shock increasing global uncertainties with repercussions in Brazil 04\/07\/2025 Santander Asset Management has adopted a defensive stance on global assets and is taking a tactical approach to domestic markets amid heightened uncertainty prompted by the \u201cunprecedented shock\u201d from the sweeping tariff hike announced by the United States, said Chief Economist and Strategist Eduardo Jarra. 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