Interest, real and Ibovespa depend on who commands the economy in Lula's new term
Report sees high long interest rates and weaker real without credible names and fiscal measures, with Ibovespa could fall close to 170 thousand points.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM BLOOMBERG LÍNEA · 3 MIN
Even before the new term begins, the market is already looking at the names that will take care of the economy. According to Bloomberg Línea, BTG Pactual, the largest investment bank in Latin America, assesses that this choice will be decisive in measuring how far the stock market can still retreat after the re-election of President Luiz Inácio Lula da Silva.
In the report released on Monday (26), the bank states that the lack of credible names and concrete measures for public accounts tends to push long interest rates upward and keep them high. In BTG's reading, this situation weakens the real and reduces the Central Bank's margin to cut the Selic, the country's basic interest rate.
In the most pessimistic scenario outlined by the bank, the Ibovespa would fall to close to 170 thousand points. At this level, and without counting Petrobras (PETR4) and Vale (VALE3), the index would be one standard deviation below the historical average of the price-to-earnings indicator.
The exchange rate enters the account. According to BTG's estimate, the real could lose between 10% and 15% in value against the dollar, which would increase the loss measured in dollars to around 30%.
For anyone who reads a publication that defends fiscal responsibility and free markets, the report's message is nothing new: without a credible commitment to the budget, interest rates weigh more heavily and the stock market suffers. The bank's reading, however, is conditional. The harshest scenario depends precisely on the absence of credible names and concrete measures for public accounts.
What changes for the investor
For those who invest in the stock market, interest rates and the dollar, the point of attention is the chain of effects described by BTG: higher long interest rates, a weaker real and less room for the Selic to fall. According to the bank's scenario, this chain is the path of greatest pressure on the Ibovespa and the exchange rate. The analysis is not a recommendation to buy or sell and does not provide a price forecast. In practice, the investor has to follow the announcements of the new economic team and the measures for public accounts, precisely the variables that the bank points out as decisive.
Automatically translated from Portuguese.
