The US market couldbe described as two-faced at the moment: on the one hand, there are positiveexpectations from the Fed’s monetary policy amid disinflation. On the otherhand, since the middle of winter, only the lazy one does not predict anearnings recession for the market, when, amid a stable or slightly worseningmacro background, companies’ incomes fall, missing analysts’ and investors’expectations.
The economy entered2023 with quite negative expectations. Capital hates uncertainty, so theplayers are wary of the prospects for US stocks. It is not worth talking aboutvaluations without reference to profits and rates since there is always achance that profits will not disappoint (and the momentum in the American macrois now very impressive) and rates will fall. In such a scenario, one can nolonger say that stocks are very expensive. Of course, if profits and economicexpectations are on the downside and interest rate expectations look “up” (theS&P 500 is priced too expensive), then there is no upside potential tospeak of.
In Europe, theeconomic surprise turned out to be very strong because of extremely lowexpectations. Statistics on the real sector has systematically beatenexpectations and inflation has also begun to slow down, it might even seem thatwe’re already past the peak. It is a heavy cocktail for short sellers: thesqueeze also added momentum to the market.
In general, at theend of 2022 - the beginning of 2023, the consensus of large investmentcompanies was to ‘bet on the global’. That means rotation from the US to othermarkets, especially EM. Quite rightly, China has risen sharply, where bothpositioning was rather modest, and the surprise turned out to be powerful, asthe opening of the country is happening faster than everyone assumed.
In general, globalgrowth is falling out of sync - developed economies, in particular, the UnitedStates, are slowing down while the emerging economies have every chance to showaccelerated growth rates. In addition, many countries have already passed thepeak tightness in monetary policy and have room to add monetary stimulus,provided that inflation slows down steadily. In Brazil, this is especiallynoticeable - against the backdrop of one of the highest real interest rates inthe world, growth here is constrained by fiscal/political uncertainty and stillhigh inflation. If these two factors recede, we may see an increase in demandfor local assets.
