{"id":93939,"date":"2025-04-30T18:07:55","date_gmt":"2025-04-30T21:07:55","guid":{"rendered":"https:\/\/murray.adv.br\/?p=93939"},"modified":"2025-04-30T18:07:55","modified_gmt":"2025-04-30T21:07:55","slug":"brazil-trade-back-in-game-amid-global-tensions","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/brazil-trade-back-in-game-amid-global-tensions\/","title":{"rendered":"\u201cBrazil trade\u201d back in game amid global tensions"},"content":{"rendered":"
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Trump\u2019s tariff moves have sparked volatility but eased pressure on local assets<\/em><\/h6>\n<\/div>\n<\/div>\n
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04\/30\/2025 <\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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Brazilian investors who braved higher-risk assets since January\u2014despite sky-high interest rates\u2014now have reason to celebrate. The fallout from U.S. President Donald Trump\u2019s sweeping tariff plan, which introduced fresh uncertainty to global markets, ended up easing pressure on Brazil\u2019s real and nominal future interest rates, equities, and the local currency.<\/p>\n<\/div>\n

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As of April 29, the benchmark Ibovespa stock index had risen 3.7% for the month and 12.3% year-to-date. Small-cap stocks were up 8.3% in April and 18% since January. Real estate stocks soared 10% in the month and 29.3% on the year, while consumer-linked stocks jumped 12.4% and 21.5%, respectively\u2014leading gains in the equity market. Meanwhile, the S&P 500 was down 0.9% in April and had lost 5.5% since the beginning of the year.<\/p>\n<\/div>\n

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In fixed income, the IRF-M index, which tracks a basket of fixed-rate government bonds and is calculated by the Brazilian Financial and Capital Markets Association (ANBIMA), delivered the strongest performance, with gains of 2.7% in April and 7.5% for the year. The IMA-B 5 index, which tracks bonds maturing within five years and linked to the IPCA consumer price index, was up 1.7% and 4.9% over the same periods. The real strengthened, with the exchange rate per U.S. dollar falling 1.3% in April and 8.9% year-to-date. Gold, a traditional hedge during crises or inflationary periods, rose 4.6% in April and 15.9% for the year<\/p>\n<\/div>\n

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Is \u2018Brazil trade\u2019 back?<\/strong><\/p>\n<\/div>\n

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\u201cNo one expected the month to end the way it did,\u201d said Sigrid Guimar\u00e3es, founding partner at Alocc Gest\u00e3o de Patrim\u00f4nio. \u201cOn \u2018Liberation Day\u2019\u2014when Trump laid out his tariff plan\u2014the U.S. market turned extremely volatile, flirting with circuit breakers and chaos. Yet it ended with the S&P 500 down 1%, while the Brazilian stock exchange rose, the dollar fell, and interest rates dropped. What we saw is that Brazil is well-positioned for this scenario.\u201d<\/p>\n<\/div>\n

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Since Alocc\u2019s clients hold significant equity exposure via a fund of actively managed portfolios, the asset manager had a close view of the gains. \u201cSome asset managers posted real returns of 10% to 13%. That\u2019s what April was about.\u201d<\/p>\n<\/div>\n

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With the rise in companies listed on the Ibovespa, the price-to-earnings (P\/E) ratio\u2014used to gauge return expectations\u2014is now at 9 times earnings, up from 7 before the rally. \u201cThese are solid real assets, but people still don\u2019t believe in Brazilian stocks. When we analyze the companies, we think, \u2018this can\u2019t be real.\u2019 If valuations return to the average, there\u2019s room for further gains, and those well positioned will benefit.\u201d<\/p>\n<\/div>\n

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Previously, the rebound was limited to the index, but now more sectors are performing well and managers are nearly fully invested, Guimar\u00e3es said. \u201cPrices are extremely attractive. If investors know how to identify the good ones, they can benefit greatly when the market improves.\u201d<\/p>\n<\/div>\n

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Fabio Zaclis, head of macro multi-strategy at Daycoval Asset Management, said part of the Brazilian stock market\u2019s rally stems from a reallocation of global resources, given that local valuations remain heavily discounted compared to peers. \u201cBrazil always draws attention from foreign investors because of valuation, but this is not yet a standalone Brazil story. It\u2019s not tied to the interest rate cycle, and there\u2019s no retail investor inflow either,\u201d he said. \u201cIt\u2019s more of a global story than a local one.\u201d<\/p>\n<\/div>\n

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In an environment of high interest rates and no fiscal reform, fundamentals haven\u2019t improved, Mr. Zaclis noted. Capital that had been sitting idle in the U.S. is now flowing toward other major currencies like the euro, Swiss franc, yen, and key emerging markets\u2014including Brazil.<\/p>\n<\/div>\n

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After a stressful start to the year for Brazilian assets, with future interest rates spiking and the exchange rate per dollar breaking past R$6, Mr.Zaclis believes the current rally is more a result of global dynamics than domestic developments.<\/p>\n<\/div>\n

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Shift in perception<\/strong><\/p>\n<\/div>\n

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What has changed since the end of last year is the perception of Brazil\u2019s Central Bank following Gabriel Gal\u00edpolo\u2019s appointment to succeed Roberto Campos Neto as its head. \u201cWe saw a Selic [policy] rate hike coupled with clear communication about inflation expectations and the need to raise rates to hit the inflation target,\u201d Mr. Zaclis said. \u201cThat explains part of the [price] relief and a risk-on move.\u201d The key question now, he said, is whether this momentum is sustainable.<\/p>\n<\/div>\n

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Mr. Zaclis also pointed out that real interest rates offered particularly high premiums, especially in strategies involving breakeven inflation\u2014comparing fixed-rate bonds with those tied to the IPCA. \u201cWe saw local interest rate curves offering historically high premiums, rarely seen when compared to the Central Bank\u2019s targets or the Focus survey,\u201d he said, referring to the Central Bank\u2019s market expectations report.<\/p>\n<\/div>\n

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With upcoming fiscal and quasi-fiscal stimulus on the radar\u2014via state-owned bank credit or new formats like private payroll-deductible loans\u2014he expects the Central Bank to keep raising rates until inflation aligns with the target. Any reversal would require changes in current inflation levels. Projections for 12 months ahead still show the IPCA hovering between 5.5% and 5.7%, far from the 3% target.<\/p>\n<\/div>\n

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Mr. Trump\u2019s tariff policy may have an external effect, shaking global markets and helping to anchor expectations in a world facing weaker growth, Mr. Zaclis added. Commodity prices could support this adjustment.<\/p>\n<\/div>\n

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Carlos Andr\u00e9, president of ANBIMA, said it remains unclear how Mr. Trump\u2019s measures are affecting global markets and domestic asset prices. \u201cThe key point is rising uncertainty. That leads to volatility. Without a clear outlook, it becomes very hard to make investment decisions or price assets reliably. The word of the moment is uncertainty.\u201d In such times, investors turn to traditional fixed income, but he sees this as a \u201ccircumstantial\u201d move.<\/p>\n<\/div>\n

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Bruno Funchal, CEO of Bradesco Asset Management, voiced cautious optimism regarding monetary policy. \u201cThe difficulties created by the tariff war and its impact on global growth could accelerate our own interest rate cut cycle.\u201d<\/p>\n<\/div>\n

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For those who diversified abroad, April brought above-average volatility\u2014but that doesn\u2019t mean allocating more of a portfolio overseas is a bad idea, said Caio Fasanella, head of investments at Nomad, a financial services platform.<\/p>\n<\/div>\n

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Global diversification<\/strong><\/p>\n<\/div>\n

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\u201cWith the sharp depreciation of the real in recent years, Brazilians have lost global purchasing power and wealth, and this long-term trend will persist because of fiscal challenges and structurally higher inflation compared to the U.S.,\u201d Mr. Fasanella said. \u201cThose who built globalized portfolios in the past are now reaping the rewards of diversification.\u201d<\/p>\n<\/div>\n

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He acknowledged, however, that investors who entered foreign markets more recently have felt the brunt of volatility since early April, when President Trump unveiled his import tariff plan. \u201cIt\u2019s a natural correction in a longer-term bull cycle,\u201d Mr. Fasanella said.<\/p>\n<\/div>\n

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Three weeks after the announcement, he said there\u2019s still no clear alternative to U.S. assets or the dollar. \u201cIt remains the safe haven\u2014where investors run to, turbulence or not\u2014be it the currency or Treasury bonds.\u201d<\/p>\n<\/div>\n

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Brazil, meanwhile, is in a markedly different place, with inflation rising for longer and currency pressure easing after the exchange rate per U.S. dollar peaked at R$6.2 at the end of 2024. \u201cThe real interest rate remains extremely high, at levels we haven\u2019t seen in a decade\u2014since the impeachment of [former president] Dilma Rousseff,\u201d Mr. Fasanella said. \u201cFor Brazilian investors, there\u2019s now a clearer path to fixed-income investments with low risk, whether in floating-rate bonds or IPCA-linked securities, given lower inflation.\u201d<\/p>\n<\/div>\n

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Still, he\u2019s cautious about fixed-rate bonds, even though yields are near their highs. With fiscal policy uncertainty and the 2026 election looming, public spending could add pressure on inflation. \u201cThis is a segment that could suffer more,\u201d he warned. As for equities, he believes a catalyst is needed for more consistent gains.<\/p>\n

*By\u00a0Adriana Cotias\u00a0\u2014 S\u00e3o Paulo<\/p>\n

Source: Valor International<\/p>\n

https:\/\/valorinternational.globo.com\/<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Trump\u2019s tariff moves have sparked volatility but eased pressure on local assets       04\/30\/2025 Brazilian investors who braved higher-risk assets since January\u2014despite sky-high interest rates\u2014now have reason to celebrate. 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