In Brazil, fixed income gained prominence at the beginning of the year, amid uncertainty about the US Federal Reserve 's next steps in relation to interest rate cuts. In February , the assets were revalued by investors . Brazilian future rates , fixed-rate public bonds and those indexed to inflation were affected. While post-fixed investments , linked to the Selic , continue their routine of gross returns close to 1% per month , public bonds linked to the IPCA and pre-fixed securities continue to test the emotional health of investors at the beginning of the year , as its earnings continue to show upward volatility and remained slightly negative during the year.
Although 2024 started out challenging for investors in pre-fixed securities , the year is still promising, because if inflation recedes as expected, securities in this category tend to appreciate in value and bring significant premium gains .
However, we have some problems on the radar, the first of which is that the FED has not yet firmly signaled a reduction in the interest rate cycle . Additionally, we have some points of concern in the Core CPI, which are not scary, but worrying. That said, if the FED does not signal something at the next committee meeting, COPOM here in Brazil will also be unable or limited to reduce the interest rate more quickly.
The global environment also brings challenges, because, as we know, we have two very serious geopolitical conflicts happening right now on the other side of the world. This puts political pressure on countries, an example of this stress is the frayed and already dangerous relationship between China and the United States. If China goes through difficulties — and there are many signs that this is likely — many of the commodities will no longer be exported, because if China's main customer is the United States, Brazil's main customer is China.
It is interesting to note that we started this article talking about something that should be fixed like fixed income , and yet here we are talking about geopolitical conflicts and international trade. This is because the market is complex and realizes that inflation is a relentless competitor . There is no point in having a fixed income rate , say 11% per year, if inflation erodes 12%. It is exactly this scenario that investment fund managers focus their research on, because, after all, their jobs exist because ordinary people, or ordinary investors , deposit their savings in the hope that financial market professionals will protect them from this type of situation. .
