Welcome to the good finance day. So, what is the financial market in 2020? The financial market in 2020 year is different from last year. Last year the stock ended very well, with more than 30% increase. This year started well, but has suffered volatility in recent weeks with the virus issue in China. I like to explain the bag in 2 ways. The factors that make the stock go up in the long run and have volatility. The economy and results of companies make the stock go up in the long run.
FINANCIAL MARKET IN 2020
The companies pass profits on to shareholders through dividends or share increases. Volatility may arise with a virus outbreak, a fight between the US and Iran. They are unpredictable things that happen during the year and do not prevent profitability. Last year the stock market had a 35% increase, but it had the new government and social security that made the year volatile and positive. This year will be very volatile. We have lower interest rates and a new COPOM meeting with the expectation that the Central Bank will further reduce the Selic rate. We will go from 4.5 to 4.25%. This is positive for the economy in the long run. So, it is difficult to predict world events, but the stock market has a good outlook for FIIs and market risk assets. It may even be a better year than the past. It is good to follow and follow the bank’s recommended portfolios and the morning call.
We will discuss the financial market in 2020, the whole year about it. The market moves according to news on the left or right. In the end what makes the difference and its companies have grown again and that makes the bag have a good result. That’s what matters in the end. My dream is that the scholarship would look like fixed income. You buy a stock and after 1 year, you will see how it is. The exchange never lost to fixed income. Some years were more difficult, but in the long run in the capital market to create wealth it is better, but you need to have the stomach for it.
It is important to mention that we expect another cut in the SELIC rate at the COPOM meeting, but it will not fall forever. We have a cycle of monetary easing. We reduced the interest rate. The Selic reached 14.25% and dropped to 4.5%. This is the Central Bank trying to stimulate our economy. Unemployment is high and the Central Bank’s greatest weapon to stimulate the economy is to cut interest rates. Ashour ends, as you said. We are reaching the end of this cycle. Last year this cycle was long, but this year will not be all about cutting interest rates and we will not end the year with 2% selic because when the economy improves, you generate inflation and the costs of the restaurant, supermarket, etc Increase.
The economy is heating up and reaching the level that will park maybe for 1 year of low interest and inflation and high cost of living. The Central Bank raises interest to avoid generating hyperinflation. Some point out that experienced an inflation rate of 60% per month when the economy was without expectation. So, the Selic will drop to 4.25%, but it must park and wait for the economy to react to that new rate. The next year it may increase to 5% year.
According to the Focus Bulletin, next year with the economy reacting well. You don’t need to have interest rates, so low that can hurt the exchange rate. Many people ask why the dollar is so high. These lower interest rates are a new dynamic in the modern world and have a negative impact on Real. There was always a lot of appeal to invest in fixed income with high interest. When other countries have surplus cash they invested in Brazil that paid more and a lot of capital came in here. Today you can receive 2% in the USA or 4.5% in Brazil, but you have the risk account. So it doesn’t make sense to invest abroad and stop entering the dollar in country, which damages our currency. So to see the exchange rate of 3.50, we need the Real to stay strong because the dollar will no longer enter here.
The Real is strong growing 3% per year with a sustainable economy. Investment grade is the grade that country receives from the world for its economic capacity. This is important because foreign investors invest in countries with this grade. If it improves, but does not have this grade, it prevents capital from moving. We lost that note a few years ago. So we have to follow some steps for the exchange rate to be more positive. Anyone who likes to travel will suffer from it, still for a while, but the prospects are good. That is why its variable income has never had as much allocation as it does today.