Turim Insights

A monthly conversation with our team about markets and strategies

06 December 2023

The improvement in the global economic scenario, the strong interest rate tightening, and the positive performance of different asset classes were some of the highlights of this month’s Turim Insights, held yesterday.

The widespread improvement in the global economic environment – marked by milder readings of inflation and economic activity – was reflected even in the communication of one of the members of the Federal Reserve’s monetary policy committee, who suggested that a cycle of nominal interest rate cuts could be initiated early next year if inflation continues to decelerate.

Other factors less related to the fundamentals of the economy, such as the issuance of U.S. Treasury bonds, also received attention in the recent window. In particular, the announcement of the intention to slow down the issuance of debt securities with longer maturities proved to be a catalyst for the tightening of U.S. interest rates.

This set of factors allowed the market to deliver a very positive performance in November, both in fixed income and in the stock market. However, the positive correlation between these two asset classes continues to create some complexity in the portfolio management process.

Brazilian assets also benefited from the improvement in the external environment. However, as explained by one of our portfolio managers, João Felipe Bandeira de Mello, “from the perspective of the local market, what has dominated the dynamics of assets – especially in fixed income and stocks – is the interest rate cutting cycle initiated by COPOM in August of this year.”

Also worth mentioning are some positive surprises in the local economy, such as the reading of the third-quarter GDP, which came above the market consensus, despite the decline in agriculture. Despite the surprise on the margin, the disclosure brought clear signs of a deceleration in activity.