May 25, 2024

The Catholic Transcript

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Holiday and Super Wednesday in the United Kingdom and Japan are marked during the week;  Check out the highlights

Holiday and Super Wednesday in the United Kingdom and Japan are marked during the week; Check out the highlights

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good morning friends. Last week was marked by intense activity and volatility among investors around the world, who were alert to the latest economic news. to us, especially in relation to the job market. The combination of Jerome PowellChairman Central ReserveAfter Wednesday’s (1) meeting, it was crucial to ease concerns, especially after the first-quarter employment spending index indicated that it rose more than forecasts.

Powell downplayed the prospect of an interest rate hike this year, much to the relief of the market. He also pointed out that interest rate cuts could happen if there is a significant downturn in the job market. Interestingly, last Tuesday (30), lower-than-expected employment data confirmed this outlook, leading the market to re-energize about the possibility of rate cuts in September and December.

Earlier this week, holidays in Japan and the United Kingdom dampened liquidity in global markets. In the United Kingdom, attention turns to the monetary policy decision on Thursday. Meanwhile, most Asian stocks posted gains this Monday, reflecting Wall Street’s optimism last Friday.

China will soon release key data such as its trade balance as President Xi Jinping makes an important trip to Europe this week. In the Eurozone and the US, the economic agenda appears light, but will be moved by several planned appearances by Fed members, which could affect expectations following weak employment data.

At the corporate level, more than 50 companies from the S&P 500 and several Brazilian companies are scheduled to release their results. In the commodities market, oil rose this morning, while iron ore showed stability.


· 00:56 — Looking forward to Wednesday Kobom

In Brazil, after a positive week for local assets, a positive international climate and an improvement in Moody’s outlook for the country – with expectations that Fitch will soon upgrade its rating – attention turned to Brasilia. The market is divided between expectations of a 0.25 or 0.50 percentage point cut in the Selic at the next Cobom meeting, with the focus on monetary policy.

The trend towards a modest cut of 25 basis points strengthened due to the influence of external scenarios previously considered by the central bank. However, recent indicators – such as local inflation below expectations and the US job market showing less buoyancy – leave me with an optimistic view that a 50-point cut may be warranted, with a more robust report.

Also, the economic agenda has still reserved the IPCA release for April on Friday. Expectations are for an increase of 0.38% on a monthly basis, which would represent a relative acceleration of 0.16% seen in March. The acceleration should be broad-based, with adverse weather conditions impacting food consumption at home, reduction in discounts applied in March for durable industrial goods, seasonal increases in apparel and pharmaceuticals and rising fuel prices.

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A lower-than-expected result will be welcomed by the market, especially if there is a fall in core services inflation, as predicted by some analysts. Rounding out the week’s agenda are data on retail sales, consolidated financial results, trade balance and the continuation of the results release season.

· 01:49 — Change of mood

In the US, last week marked a turning point for financial markets after significant changes in April. Especially in the last three days of the week, we saw an impressive rally in the two-year Treasury bond, which is particularly sensitive to interest rate expectations. The security rose more than 5% ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting, hitting a level not seen since November, and was at 4.70% following Friday’s US jobs report.

Eventually, it stabilized at a moderate level of 4.82%. This move indicates the Federal Reserve’s willingness to ease monetary policy, supported by strong employment justifications, which allows policymakers to move in this direction, thus halting the rise in the yield curve to 5%. A slowdown in employment added further arguments to the optimists.

The U.S. Labor Department said the economy added 175,000 jobs in April, down from 315,000 in March and below a consensus of economists expecting 235,000 jobs. The unemployment rate rose slightly to 3.9% from 3.8% in the previous month.

In addition, wage growth slowed to 0.2% from 0.3% in March. At the same time, the earnings season has shown positive performance, as exemplified by the 6% increase in Apple shares on Friday. While all major sectors of the S&P 500 posted gains on the day, the technology sector stood out with a 2.8% gain. More results are scheduled this week, although the season’s most important ones seem to have already passed.

· 02:37 — Sale in May?

There is an old adage that is very popular in financial circles, especially in the US: “Sell and leave in May.” Based on the belief that the market will perform poorly from May to October, this suggests that investors should liquidate their positions in May and return to the market after the perceived decline in prices during the summer months.

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The origin of this proverb goes back to ancient practices, influenced by factors such as holiday cycles and bonus periods, as well as historical observations that occurred between major market crashes such as the 1929 crash and Black Monday of 1987. Extensive academic research and market studies have been carried out on this strategy, analyzing its impact over different share classes and specific time periods.

Although some seasonal patterns are recognized and there is a bit more risk in the summer months, stocks generally weather long-term, seasonal volatility. Therefore, keeping investments active throughout the year may be more prudent than trying to predict the market, especially considering other reliable indicators for decision-making, such as company profitability, market valuations and interest rate trends.

Historically, over the past 40 years, selling in May has proven ineffective, with the S&P 500 index posting positive returns over 75% of these periods. Hence, this old strategy seems to have lost its foundation in modern practice.

· 03:24 — Logistical problems and prospects for peace

Global trade major Maersk Group has warned that disruptions to maritime transport caused by Houthi attacks on ships in the Red Sea will last until the end of the year. Since December, Maersk and other companies in the sector have diverted their shipping routes to bypass Africa, avoiding Houthi attacks in the Red Sea.

This change has extended travel times and consequently, increased freight rates. The attacks significantly reduced the flow of containers through the Suez Canal, falling by approximately 80%. In addition, persistent droughts have restricted navigability through the Panama Canal, and the destruction of the Francis Scott Key Bridge has reduced access to Baltimore Harbor for large ships, further complicating the global logistics situation.

Parallel to this, efforts are underway to establish peace in the Middle East. The United States and Saudi Arabia are close to finalizing a landmark security deal, a priority for the Biden administration that could change regional dynamics and help establish formal diplomatic ties between Israel and Saudi Arabia for the first time.

The deal could also affect operations in the Gaza Strip. For it to become a binding agreement with the necessary 67 votes in the US Senate, Saudi Arabia would have to formalize diplomatic ties with Israel, which would require a resolution to the conflict in the region. The deal, if passed, would be a significant achievement for the United States.

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· 04:11 — The biggest election in the world is still going on

A few weeks ago, I announced that the biggest election in the world was about to begin in India. This election process is still ongoing and will continue until early June. Conducting an election with such a broad electorate (nearly one billion registered voters out of a population of about 1.5 billion) is extraordinarily complex. After ten years in power, Prime Minister Narendra Modi is widely expected to be re-elected for a third term.

Modi’s Bharatiya Janata Party is hoping for an even bigger victory this time around, driven by rapid growth in India’s economy and the fulfillment of promises that resonate with populist and Hindu nationalist aspirations. This year, for example, was marked by the inauguration of a controversial temple built on the site of an old mosque, a clearly populist gesture given that 80% of Indians are Hindu.

In addition, India is experiencing geopolitical headwinds in the wake of the growing rivalry between the US and China. Major companies such as Apple, Boeing and Micron have announced plans to open new stores and factories in India, seeking to diversify their operations beyond Chinese soil. As we have discussed earlier, it is estimated that by the end of this decade, India will overtake China as the main driver of global growth.

  • read more: Look inside Free report According to Empiricus Research analysts, 10 best bets on international markets to profit in the coming months.

· 05:05 — My favorite vehicle for farming

In a global scenario of rising geopolitical tensions, food security is emerging as a critical issue. Brazil, which stands out as one of the world’s major food producers and exporters, plays a fundamental role in this context. The current world situation is marked by significant fragmentation, with the emergence of new power centers and the weakening of established international institutions.

This fragmentation directly affects Brazilian agribusiness, which is crucially dependent on a stable and receptive global market. At the same time, in the context of this global governance crisis, where the institutions created in the post-war period do not meet expectations, a window arises to position Brazil as a central axis on the world stage, joining countries like India. and Saudi Arabia.