In its monthly letter, the management team said February extended the capital reallocation trend away from the United States and the dollar. Gold, the clearest gauge of that narrative, rose 7.7% in the month, after climbing 13.4% in January. Emerging markets also performed well, with a broad emerging-market equity index rising 5.9% in the month, led by South Korea at 19.5%, while Brazil’s Ibovespa stock index closed up 4.1%.

“All of that cycle was interrupted, however, on the final day of February, when the United States and Israel began a series of attacks on Iran that extended into early March and called into question much of the dynamic with which markets had been comfortable,” Verde wrote.

Oil shock

Major uncertainty over oil and fuel prices, with tanker traffic through the Strait of Hormuz halted, pushed WTI crude up 35.6% to $91 a barrel in the first week of March, a move rarely seen in history. Over the weekend, it topped $100.

“This shock to energy costs has a major impact on inflation, global interest rates, and the prospects for continuation of the global growth cycle we had been seeing recently, and that the market had been pricing in,” Verde’s team said, adding that forecasts about how the conflict will evolve are likely to be of limited value because of the erratic way U.S. President Donald Trump makes decisions.

“What we can say for now is that there is a political preference for a short conflict, after all the United States goes to the polls in November this year and the president’s party had already been losing popularity even before households were hit in the wallet. Incentives shape behavior,” the letter said.

“So it seems to us that the tendency is for the conflict to be reduced, though perhaps not ended, in the coming weeks, with likely relief in risk premiums. But it is still too early to explore medium-term consequences.”

Brazil positions

In Verde’s view, the Brazilian market has also come under pressure in recent days because there was little cushion in stock prices, the exchange rate and interest rates, “and we are seeing a largely technical correction, with a reduction in flows.”

External winds are setting the direction, while the political cycle is mixing scandals and falling popularity for the incumbent. The election cycle will begin in earnest soon.

The fund reduced its exposure to Brazilian equities at the end of the month, but increased it again after the turbulence linked to the war in Iran. Its position in global equities was maintained. In Brazilian fixed income, the multi-strategy fund, locally known as multimarket, remains long local real interest rates.