Turim’s Insights

November was marked by the deterioration of the Brazilian fiscal situation, with the attempt to circumvent the spending ceiling and the prospect of a more aggressive increase of Selic, the basic interest rate. Abroad, attention was directed to signals from central banks. These were the highlights in this month’s webinar.

Henrique Santos, our economist, highlighted that the PEC proposal for “precatório” represents a relevant weakening in the main fiscal anchor of the country:

“The change in the ceiling was designed to make room for accelerating spending during the election year, a worse outcome compared to a temporary request for extraordinary spending outside the ceiling in 2022, as it permanently undermines the rule’s credibility” he explained. Furthermore, the uncertainties about the fiscal scenario and debates concerning the new social benefit (Auxílio Brasil) resulted in the Central Bank acting in a more emphatic way with interest rates, increasing even more the Selic.

Regarding the international scenario, our economist pondered that the beginning of the tapering process in the US was well telegraphed by the American central bank, and that market discussion should turn to the speed of the interest rate hike, which will be defined by the clash between the diverging views on how temporary the current inflation shock we see around the world is.

Our CIO Leonardo Martins Moraes spoke about the main stock markets. While the vast majority of emerging markets we’re able to perform positively in the year, the Brazilian stock market drops in the range of 13%: “In the last 24 months, the Brazilian index is the only one on the downside. This picture reflects the high uncertainty scenario, and we wasted the opportunity generated by a global environment favorable to riskier assets,” he said.

Gustavo Marini, founder and co-CEO of Turim, and João Felipe Bandeira de Mello, fund analyst, also participated in the webinar.