JPMorgan strategists see domestic issues getting in the way of an upturn in the local stock market in the coming months, despite an expected more positive global environment, according to a report to clients on Monday (27).
“Our optimistic view of Brazil has always been based on global history… However, we believe that the next few months will be dominated by the domestic news flow, which is generally not a source of good news,” they said.
They recently revised the base case for the Ibovespa at the end of the year to 125,000 points, from 133,000 points previously. Despite the adjustment, this prognosis still suggests an increase of almost 27% in relation to the closing of the Ibovespa last Friday (24), at 98,672.26 points.
Among the local components that will affect markets in the second half, they cite the resurgence of fiscal risk and the elections, as well as the eventual end of the cycle of interest rate hikes and an expected slowdown in economic growth.
“The local narrative is likely a bump in what is perhaps the best value opportunity within emerging markets given the global landscape, but will prevent markets from improving in the coming months,” Emy Shayo Cherman and team wrote in the report.
For them, Brazilian stocks should recover the highest levels recorded in the first half, but this should only occur after the elections, when the global effect is consolidated.
In the external scenario, strategists list the macro and market recovery in China, the peak of a more aggressive stance with interest rates in the United States and sustained high commodity prices as factors for the movement of markets in the second half of the year.
“Our recommendation is not to be too adventurous: position yourself in value (raw materials, financial sector), utilities (also value) and defensive consumption (supermarkets, drugstores). While we have energy in our portfolio, the local history is very complicated.”
Source: CNN Brasil
