Ibovespa is approaching the end of the semester on a negative note: is the optimism with the stock market over forever?

After reaching 130 thousand points at the beginning of May, the Ibovespa it has lost strength from week to week and today it is trading at 124 thousand points. With the month of June upon us, the index approaches the end of the semester on a pessimistic note. But what generated this risk aversion in Ibov? Will the Brazilian stock market still be able to reverse the trend in 2024?

Between the end of last year and the beginning of this year there was a climate of euphoria which led to Ibov at historic highs, around 134 thousand points. This scenario was motivated primarily by the expectation of a reduction in US interestwhich ultimately did not materialize.

“We started the year very optimistic, given the strong downward trend in interest rates. In the US, seven cuts were expected over the course of the year. But this expectation has changed completely,” says Beto Saadia, economist and chief investment officer at Nomi.

“The market as a whole created excellent expectations in the last two months of last year. And this first half of 2024 brought everyone back to reality. It served to calm expectations a bit”, adds Diego Faust, variable income operator of Manchester Investments.

Therefore, data on inflation and activity in the United States that prevented an interest rate cut are the first reason for a deterioration in expectations regarding the Brazilian stock market. Subsequently, the internal scenario itself began to raise doubts.

“The change in the fiscal target caused a worsening of the scenario. This is what had a negative impact on the index. There was the question Petrobras, which is also a tax issue, since we expect fewer dividends. There was a deterioration of Planalto’s relations with Congress, leading to the bombings,” Saadia says.

“Today there is a very strong foreign outflow. So we would need a very large domestic flow to at least see the stock market move sideways. But this was not exactly due to fiscal risks,” adds Faust.

Has the optimism finally ended or is there still hope for Ibovespa?

despite the Bovespa Index approaching the end of the first half of the year on a negative note, analysts still maintain a constructive view for the index throughout 2024. Just as at the end of last year, today the market’s biggest expectation is the possible reduction of interest rates in the United States.

“OR Ibovespa performance This month has been a little scarier. But this phase has been dragging on since the beginning of the year, with the flight of foreign capital towards the North American market, which is cheap. It’s a waiting period until the Federal Reserve actually cuts interest rates. So I don’t see the end of optimism towards the Brazilian stock market, but rather an external scenario that attracts foreign capital and, consequently, weighs here,” says Faust.

“The scenario is still positive. The downward trend in interest rates continues. We just need more time to resume the down cycle here in Brazil and start the down cycle there in the US,” Saadia adds.

The long-awaited round of interest rate cuts in the United States could occur in July. If this scenario materializes, therefore, the Stock exchange in Brazil There may be better days in the second half.

“We believe that the scenario continues to point in the right direction, which is the decline in July. So it is natural that we do not see the Ibovespa falling below the level of 125 thousand points. But certainly the market continues to have the tax issue on its radar,” adds Faust.

Source: Terra

Rose

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