Reports

February 2025

The U.S. economy remains resilient, with several indicators surpassing expectations despite a restrictive monetary policy environment. The prospect of higher interest rates for a longer period has widened the divergence between the U.S. monetary cycle and that of other developed economies, such as the Eurozone and the United Kingdom, which are moving toward more significant interest rate cuts. Furthermore, the escalation of the trade war may amplify the challenges for monetary policy, affecting the path of global inflation.

Global equity markets delivered mixed performances, with a sharp decline in semiconductor and chip companies following the announcement of the DeepSeek-R1 model – an open-source and free AI system with capabilities comparable to leading solutions in the segment. On the other hand, in Brazil, the Ibovespa index rose by 4.9% in January, reversing a large part of December’s losses, amid a broader recovery in local risk assets at the beginning of the year (following a period of significant stress in December).

In Brazil, early signs of a potential slowdown in growth appear to be emerging, especially in the labor market, with the first increase in the unemployment rate in over a year (according to our seasonal adjustment), along with a further deceleration in the creation of formal jobs. Meanwhile, the Central Bank raised the Selic rate to 13.25% per year, maintaining the signal of another hike, while acknowledging that economic activity may be slowing – although there is no concrete evidence of an abrupt deceleration.

After three consecutive months of depreciation, the Brazilian real posted a strong appreciation in January, outperforming other emerging market currencies. This movement also appears to reflect an improvement in the overall perception of domestic assets, despite the announcements of new import tariffs in the U.S.

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March 2025

The March Economic Report highlights the increase in uncertainty in the U.S., changes in European fiscal policy, and signs of a slowdown in the Brazilian economy.

In the global scenario, the imposition of new tariffs in the U.S. has raised the risks of a slowdown in consumption and investment. In Europe, Germany announced its intention to approve a robust fiscal package focused on defense and infrastructure, which could radically change the region’s medium-term outlook.

In the markets, the sharp rise in long-term government bond yields in Germany stands out. On the other hand, concerns about economic activity in the U.S. have led the market to price in additional cuts to the Fed Funds rate by year-end.

In Brazil, GDP for the fourth quarter of 2024 grew by 0.2%, below projections, reinforcing the scenario of a gradual slowdown in activity throughout 2025. The market is already pricing in the end of the Selic rate hiking cycle, with expectations of stabilization by mid-year.

In the local market, the stock exchange gave back part of the gains recorded in the previous month, despite slightly positive foreign investor flows. The Brazilian real followed a similar path, giving back a small portion of the appreciation observed in January, despite a marginal strengthening of peer currencies.

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January 2025

The first Economic Report of 2025 highlights the resilience of the U.S. economy, the outlook for upcoming monetary policy decisions in the United States, and the challenges faced by the domestic market in Brazil, with special attention to the depreciation of the Brazilian Real in December.

In the U.S., the latest labor market data significantly exceeded projections, confirming that the economy remains robust despite the monetary tightening of the past two years. Additionally, some metrics point to an increase in inflation expectations, reflecting economic surprises in the fourth quarter and the potential implications of new policies related to tariffs and immigration.

In Brazil, inflation ended 2024 above the upper limit of the target range, with the Central Bank warning that price levels are expected to remain elevated at least until the third quarter of 2025. Although economic growth outperformed expectations last year, a slowdown is anticipated in response to contractionary monetary policy.

In the markets, the S&P 500 delivered another year of strong gains, rising more than 20%, driven by the “Magnificent 7.” In contrast, the Ibovespa declined by 10.4% in 2024, reflecting the weakness across other asset classes in the local market. One of the few highlights was the private credit market, which outperformed the CDI throughout the year despite losing momentum in December.

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December 2024

The December Economic Report highlights the resilience of the global economy, the pressure on the dollar following the U.S. elections, and the fiscal challenges faced by Brazil.

In the global scenario, U.S. employment data presents mixed signals but remains consistent with a resilient economy. Particularly noteworthy is the stability in unemployment insurance claims, which suggests that the risks of an abrupt slowdown (hard landing) remain low. In the Eurozone, the situation is different, with accumulating evidence of economic slowdown increasing the likelihood of a faster monetary easing cycle by the European Central Bank.

Brazil’s GDP showed robust growth in the third quarter, with a particular emphasis on domestic absorption (excluding the effects of the contraction in net exports and inventory variations). However, the observed expansion far exceeds potential GDP estimates, raising risks of inflationary pressures and a future slowdown. Additionally, rising uncertainty in the local market, driven primarily by the unsustainability of public accounts, has intensified pressure on the Central Bank. In this context, the monetary tightening may push the Selic rate above 15% in 2025.

In the markets, resilient economic activity and favorable prospects for the private sector, intensified by the election results, have contributed to the positive performance of the U.S. stock market, despite a new round of rising interest rates throughout November.

The dollar continued its upward trajectory, driven by expectations of economic policies from the Republican government starting next year. In Brazil, the announcement of a spending cut package, combined with an expansion of income tax exemptions, generated uncertainties about public accounts. This scenario contributed to the sharp depreciation of the real, which reached historic levels above R$6.00/USD.

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November 2025

The U.S. economy is also showing signs of deceleration, affected by seasonal factors such as natural disasters and labor strikes, which contributed to lower-than-expected net job creation.

In the markets, global inflation remains resilient, with the U.S. PCE deflator accelerating slightly, though without major surprises. U.S. equities posted positive performance, supported by post-election sentiment, while emerging markets, including Brazil, faced increased challenges. U.S. interest rate volatility and the rise in the VIX index reflect a heightened sense of uncertainty.

In Brazil, the government is working on a spending cut package of approximately R$30 billion to meet its fiscal targets, though structural reforms are still urgently needed. Consumer inflation accelerated in October, particularly in inertia-driven components, reinforcing concerns about overheating in the economy and its potential impact on prices.

The Brazilian real remains under pressure, especially compared to other emerging market currencies, due to local fiscal uncertainty and a volatile global backdrop. The prospect of higher tariffs and looser regulation in the U.S., should Trump’s victory be confirmed, also poses additional risks for currencies such as the real, which is exposed to commodities and emerging markets.

This complex environment underscores the importance of closely monitoring both political and economic trends, as government decisions in the U.S. and fiscal adjustments in Brazil can directly impact markets and the global economy.

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October 2024

The October Economic Report highlights the beginning of a new interest rate cut cycle in the U.S., the Chinese government’s response to slowing domestic demand, and revisions to the inflation forecasts by Brazil’s Central Bank.

Globally, the Federal Reserve initiated a rate cut cycle, with a 50 basis point reduction at the latest FOMC meeting, bringing the federal funds rate to a range between 4.75% and 5.00%. Central bank president Jerome Powell indicated there is no rush for further cuts, suggesting the pace of future cuts would be 25 basis points per meeting, depending on economic data.

In contrast, China announced its largest stimulus package since the pandemic in response to declining domestic demand. Measures include interest rate cuts, reductions in reserve requirements, and targeted actions for the real estate and stock markets. Chinese President Xi Jinping also addressed an extraordinary Politburo meeting, indicating further stimulus, including fiscal measures, is on the horizon. The market responded positively, with stocks and commodities, such as iron ore, gaining value.

In Brazil, the Central Bank raised the Selic rate by 25 basis points to 10.75% per year in response to persistent inflation and strong economic growth. Despite a slight deceleration observed in the IPCA-15, influenced by volatile items like airfare and vehicle insurance, inflationary pressures in the country remain challenging.
In the markets, we observe an increase in the interest rate differential between Brazil and the U.S., with the U.S. entering a monetary easing cycle while Brazil is tightening. In the U.S. stock market, a potential mean reversion among indices may occur if the soft-landing scenario materializes, while the local Brazilian stock market faces challenges, historically underperforming during interest rate hike cycles. Nevertheless, we believe it is important to maintain allocations in equities, which still offer attractive multiples in a resilient economy, with potential positive drivers from emerging market flows.

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September 2024

The September Economic Report highlights the global scenario of economic slowdown and monetary adjustments in developed economies, especially in the U.S.

The improvement in inflation data and the slowdown in the labor market observed over the past few months allowed Federal Reserve Chairman Jerome Powell to signal the start of an interest rate-cutting cycle in September, during his speech at the Jackson Hole Symposium. The decision comes about six months after the first central bank of a developed economy (Switzerland) made its first rate cut of the year. Additionally, the U.S. elections and their possible implications on global trade remain under scrutiny.

In Brazil, the GDP for the second quarter grew by 1.4%, surpassing expectations. However, inflation remains persistent, leading the Central Bank to revise its monetary policy. The strong economy and the interruption of the disinflation process in the Brazilian economy prompted the Central Bank to begin a new interest rate hike cycle starting in September. As a result, Brazil stands out as one of the few economies in the world with the prospect of increasing interest rates over the next 12 months.

In the markets, the U.S. stock market continued to show strong results, reflecting the expectation of rate cuts amid a controlled economic slowdown. In Brazil, the Ibovespa posted a solid rise, driven by improved company results (aligned with the evidence of a strong economy), while the credit market continues to attract significant inflows in a high-interest-rate environment. On the other hand, the Dollar remains strong against the Real, in a challenging environment for currencies used in interest carry strategies.

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August 2024

The August Economic Report highlights changes in global economic expectations, financial market reactions, and Brazil’s challenges.

Global inflation continues to moderate, particularly in the U.S., where the June PCE deflator confirmed a significant slowdown in the second quarter of 2024. The Bank of England (BoE) cut its interest rate for the first time since 2020, while the Federal Reserve (FED) held rates steady but signaled the possibility of future cuts. The U.S. labor market showed signs of slowing, raising concerns about a potential recession.

Global markets reflected the increasing risk of recession, especially in the U.S., with a rapid decline in interest rates and increased volatility in stock markets, as evidenced by the VIX index. The Bank of Japan (BoJ) continued to normalize its monetary policy by raising the base rate, negatively impacting the markets.

Brazil faces fiscal challenges, with the local market skeptical about the government’s ability to meet its primary result targets. Despite revenue growth, expenses continue to rise above expectations. The Monetary Policy Committee of the Central Bank (COPOM) kept interest rates steady but indicated that further hikes might be necessary due to worsening economic conditions.

The Brazilian foreign exchange market remains under pressure, with the real continuing its depreciation trajectory, resulting in underperformance compared to other similar currencies.

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July 2024

The July Economic Report highlights changes in inflation and interest rate expectations in the United States, the interruption of the interest rate cut cycle in Brazil, and the performance of global and local financial markets.

The first debate among the United States presidential candidates increased uncertainty regarding Joe Biden’s health, raising the chances of Trump being elected in November and bringing speculation about a possible replacement of Biden as the Democratic candidate. Inflation in the United States showed a strong deceleration in May, with favorable data even in the more inertial components. Despite this, the Federal Reserve’s Federal Open Market Committee (FOMC) revised upwards its inflation and interest rate projections, including the estimate of the long-term interest rate, considered a proxy for the neutral rate.

The U.S. interest rate markets closed more intensely after the release of benign readings in the consumer inflation data for May. At the same time, the American stock market recorded another month of gains concentrated in a few companies.

In Brazil, the Central Bank’s Monetary Policy Committee (COPOM) decided to interrupt its cycle of interest rate cuts, signaling high rates for a longer period. This decision came amid the unanchoring of inflation expectations and intense currency depreciation. The Brazilian government promised to conduct a “fine-tooth comb” on expenses, but the sustainability of the fiscal framework remains at risk.

The Real depreciated significantly, diverging from other comparable currencies, although part of the movement was reversed after improved communication from the government. Meanwhile, the domestic stock market continued to underperform compared to global markets, reflecting the deterioration of sentiment regarding the local economic situation.

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June 2024

The June Economic Report highlights the beginning of interest rate cuts in some of the major developed economies, the gradual moderation of the U.S. labor market, the growth of the Chinese economy, the robust Brazilian GDP in the first quarter, and their impacts on the markets.

On the global stage, after a prolonged period of disinflation, some of the major developed economies are finally starting their respective cycles of interest rate cuts. The central banks of Switzerland, Sweden, Canada, and the Eurozone were the first to reduce their rates, with expectations that the UK and the United States will follow this trend by the end of the year. The labor market is also showing signs of normalization, with the unemployment rate and the number of job openings per unemployed person approaching pre-pandemic levels. Meanwhile, the Chinese economy is growing due to economic stimuli, despite facing challenges in domestic demand and the real estate sector.

Following the Federal Reserve’s Monetary Policy Committee (FOMC) minutes clarifying members’ willingness to raise interest rates, the U.S. yield curve began to steepen, although favorable economic data helped mitigate this movement. Interest rates closed May near their previous month’s levels, maintaining the likelihood that the first rate cut will occur in September. The American stock market, represented by the S&P 500, continued to perform positively, rising 4.6% in May and 26% over the last twelve months.

In Brazil, GDP for the first quarter rose 0.8% compared to the previous quarter, surpassing market consensus, reflecting the resilience of household consumption and the recovery in fixed capital investment. This performance reinforces growth expectations for 2024, currently projected slightly above 2%. Similarly, the labor market continues to surprise, with the unemployment rate trending downward and wage mass showing significant increases in April, potentially posing challenges for disinflation in the service segment and consequently for the Monetary Policy Committee of the Central Bank’s interest rate cut cycle.

The last COPOM decision was poorly received by the market, increasing uncertainty about the committee’s future stance and reflecting in higher premiums in the yield curve and implied inflation. The Real, in turn, recorded weaker performance against its comparable currencies, with local investors reducing their positions amid worsening domestic conditions.

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May 2024

The May Economic Report highlights robust inflation data and a moderation in the U.S. labor market, the postponement of interest rate cut expectations by the FOMC, the revision of fiscal targets in Brazil, and the impact of foreign flows on the Ibovespa.

In the global scenario, U.S. inflation data remained consistently strong in the first quarter of 2024, particularly the quarterly PCE, which surprised and led to a significant revision of January’s figures. The U.S. labor market is showing signs of a slowdown, with net job creation below expectations, moderation in wages, and a slight increase in the unemployment rate. The FOMC announced a deceleration in quantitative tightening in its latest communiqué, reducing the FED’s monthly balance sheet reduction pace starting in June.

In Brazil, sectoral surveys and labor market data remained strong in March, confirming a robust first quarter despite negative surprises in industry and retail. The government revised the primary surplus target for 2025 and 2026, reflecting the fragility of fiscal commitment, although Moody’s upgraded Brazil’s rating outlook to positive.

In the markets, as inflation proved stronger than expected in 2024, the anticipated start date for interest rate cuts in the United States was postponed. Currently, the market is divided between the possibilities of one or two 25 basis points (bps) cuts by the end of the year. Additionally, the U.S. corporate earnings season was positive, with profits exceeding expectations, boosting the performance of the S&P 500.

In Brazil, the Monetary Policy Committee of the Central Bank of Brazil (COPOM) opted for a smaller-than-prescribed cut in the Selic rate, with a split vote between members appointed by the previous government (who voted for a 25 bps cut) and new appointees (who advocated for maintaining the guidance of a 50 bps cut). The division caused discomfort in the market, which began to fear even more that the committee would become more lenient on inflation from next year when the new appointees become the majority. Finally, foreign investment in the Brazilian stock market was negative in the first four months of 2024, impacting the index’s performance. On the other hand, we are observing small signs of reversal in the preliminary data for May.

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March 2024

The March Economic Report highlights signs of accelerating global activity, consolidation of candidates in the US elections, positive performance of American stocks driven by earnings growth expectations, and economic challenges and opportunities in Brazil.

In the global scenario, we observe signs of economic activity acceleration, although interest rates remain high. This movement is occurring not only in the US but also in other parts of the world, including Asian countries such as South Korea, whose exports are considered a leading indicator for the global economic cycle.

Consumer inflation surprised the market with an acceleration starting from January, followed by some improvement in February. These data reinforce the recent dynamics of the interest rate market, which has been postponing implicit expectations of rate cuts in the US. Regarding the US presidential elections, the “Super Tuesday” confirmed the candidacies of Joe Biden and Donald Trump with a significant advantage.

Despite interest rate volatility, US stock indices maintain positive performance, driven by earnings growth expectations, especially in technology companies. The mobile correlation between stocks and US government bonds remains at a positive level.

In Brazil, the GDP of the fourth quarter of 2023 confirmed the stagnation of economic growth, although expectations for 2024 are on an upward trajectory. Strong labor market and wage pressures represent risks for inflation, but commodity prices have provided some relief. We observe a gradual movement of increasing local interest rates, reflecting global interest rates and service inflation.

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April 2024

The April Economic Report highlights interest rate movements in developed countries, impressive labor market data in Brazil, and the challenging scenario faced by the Real.

In April, Japan saw its first interest rate hike in almost two decades, contrasting with most of the rest of the world, which had raised interest rates significantly until last year and is now delivering (or planning to deliver) rate cuts. Meanwhile, the Swiss National Bank was the first among peers in major developed economies to initiate a cycle of interest rate cuts, possibly favoring similar movements in other regions.

In its March meeting, the Federal Reserve kept the US benchmark rate steady but made significant adjustments to its economic projections, signaling higher rates for longer. Moreover, the meeting minutes revealed that the vast majority of committee members wish to begin a slowdown in the pace of asset sales from the central bank’s balance sheet soon.

The interest rate market, which had converged to the expectations of the FOMC (Federal Open Market Committee), reopened following robust data on economic activity, labor market, and inflation. Despite volatility, the US stock market maintained a positive performance in the first quarter, with contributions less concentrated in large technology companies due to improvements in other sectors such as energy.

In Brazil, recent labor market data continues to be impressive, with another month of strong net formal job creation in February, as indicated by Caged, and a historically low unemployment rate according to PNAD Contínua. Nevertheless, underlying services showed results below expectations in March’s IPCA, although they remain at elevated levels. Additionally, the National Treasury’s bi-monthly revenue and expenditure report revealed a comfortable result at the beginning of the year, postponing the need for budgetary contingencies.

On the other hand, the Brazilian stock market, represented by the Ibovespa, has faced challenges since the beginning of the year, with much of the negative performance coming from state-owned companies such as Petrobras and Vale. The fund industry stands out, delivering better results than the index in 2024. Meanwhile, the Real has been deteriorating, surpassing the 5 US$/R$ mark at the end of March and approaching 5.30 US$/R$ in mid-April, even after the additional foreign exchange swap auction announced by the Central Bank.

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February 2024

The Turim Monthly Economic Report highlights the global dynamics at the beginning of 2024, revealing a strong job market in the United States, escalating geopolitical tensions, and volatility in global interest rates.

The Non-Farm Payroll surprised the market with a net creation of 353 thousand jobs in January, well beyond estimates. Additionally, there was an acceleration in hourly wages, driven by weather-related factors that impacted actual hours worked.

On the global front, geopolitical tensions, especially in the Red Sea region, affected supply chains, resulting in increased freight costs. Regarding the U.S. presidential election, former President Donald Trump confirms strength in the Republican primaries, making the most likely outcome a contest between Trump and the current President Joe Biden, representing the Democratic Party.

In Brazil, the January IPCA (National Broad Consumer Price Index) exceeded expectations, revealing continued high pressure on underlying service prices. On the other hand, there is also an improvement in the external accounts, driven by the strength of net exports in the trade balance.

In the markets, the beginning of the year was marked by volatility in interest rates due to uncertainty about global monetary policy, especially in the U.S. The market, which had been assigning a high probability of cuts already in the March meeting, faced a sequence of “discouraging” events for the thesis, postponing expectations for the start of the cutting cycle.

Some of the major U.S. stock indices, such as the S&P 500 and the Nasdaq Composite, ended January in positive territory despite interest rate volatility. However, the returns of these indices are largely attributed to a few names. That said, the Ibovespa started the year with a weaker performance.

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December 2023

The Economic Report for this month highlights the strong process of global disinflation, the conservative stance of the COPOM, and the closure of global interest rates in the last months of 2023.

In 2023, we witnessed a faster global disinflation than the market expected, driven by the reorganization of production chains and the moderation of commodity prices. In this context, the central banks of major economies were able to choose to combat inflation in an “opportunistic” manner, enabling an interruption of the interest rate hike cycle in 2023. In the case of the United States, there is speculation that the interest rate cut cycle may begin as early as the first quarter of 2024.

Despite the improvement in the economic situation, the Monetary Policy Committee of the Central Bank of Brazil (COPOM) adopted a conservative stance, maintaining the indication that it foresees the maintenance of the current pace of interest rate cuts in the upcoming meetings. At the same time, the country’s net exports reached a record balance of almost 100 billion dollars, reflecting growth in the volume of exports, despite the decline in prices of commodities important for the export agenda.

December was also marked by the closure of interest rates in the U.S., impacting not only short-term maturity bonds but also longer-term ones. This movement helped explain the strong performance of stock indices in the month. On the other hand, the majority of the return of the main indices for the year was concentrated in a few names. For example, the S&P 500 had about 75% of its return explained by the “Magnificent 7” – a name attributed to a hypothetical basket of seven of the largest technology companies in the index.

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