Market projects Stock Exchange above 140 thousand points in 2024 – 12/24/2023 – Market

The Stock Exchange should continue to be impacted by falling interest rates in Brazil and the United States in 2024.

Even with some uncertainties still on the radar, banks and analysis houses are ending the year more optimistic than they started, and project the Ibovespa above 140 thousand points.

“The year 2023 began with uncertainty about the inflation target, the implementation of the fiscal framework, uncertainty about revenue measures. And we are ending the year with a GDP [Produto Interno Bruto] well above expectations”, says the head of economics in Brazil and strategies for Latin America at BofA (Bank of America), David Beker.

The economist states that, although the fiscal issue is still a structural problem in the country that raises concern among investors, the economic team of Minister Fernando Haddad (PT) managed to deliver a reasonable result.

Furthermore, when the internal fiscal situation is compared with that of other countries, Brazil is not in a bad position, says Beker.

Bank of America expects the Ibovespa to reach 145 thousand points in 2024.

For the bank’s economist, the watershed in the country next year should occur when the basic interest rate falls below 10% and reaches single digits. On average, the market expects the Selic rate to end the current interest rate cut cycle in 2024, at 9.5% per year.

In addition to the better domestic environment, inflation and slowing economic activity abroad led the Federal Reserve, the central bank of the United States, to recalibrate its speech and be more willing to cut interest rates next year, which increases the optimism of the Marketplace.

“If we did well this year with rising interest rates in the US, imagine with an interest rate cut. If American inflation converges and the Fed starts cutting interest rates in March or April, the scenario in Brazil will be much better”, says Paulo Gala, chief economist at Master bank.

The financial institution does not make projections for Ibovespa, but Gala says he believes that the main index on the São Paulo Stock Exchange should exceed 140 thousand points in 2024.

After more than two years without reaching its historic peak, in June 2021, the Ibovespa broke its maximum for the first time this year on December 14, reaching 130,842 points.

The record occurred one day after the last interest rate decision in the US, when the Federal Reserve kept the country’s base rate unchanged, but signaled that the rising cycle is at an end.

After that day, optimism continued and the Ibovespa successively returned to renewing its maximum in other trading sessions, and currently stands at around 132 thousand points.

Variable income manager Marcos Kawakami, from the European bank BNP Paribas in Brazil, highlights the importance of the macroeconomic scenario, low interest rates and inflation, and economic growth, for the shares of companies listed on the Stock Exchange.

“The recipe [das companhias] It is linked to the country’s economic activity, fixed costs are linked to inflation and financial costs are linked to Selic. So, when we think about the company’s profit, it is a composition of macroeconomic factors. If we have resilient activity and low inflation and interest rates, we can expect better profits for next year”, he says.

Based on the current level of Ibovespa, BNP Parribas calculates that the index should reach around 149 thousand points next year.

Retail should resurrect on the Stock Exchange in 2024

Economist David Beker, from BofA, says that the bank will look more closely at retail next year, after having positioned itself pessimistically in relation to the sector in 2023. Still, the financial institution remains cautious.

For Beker, from a recovery point of view, without a doubt, retail should be the stock market’s biggest highlight in 2024, as the sector is heavily indebted, and lower interest rates bring improvements to companies’ margins.

The sector’s current share prices are already beginning to point to this recovery, according to the economist.

“Today, basically, it’s a sector that people don’t want to have [como investimento]. So, in technical terms, this is an additional ingredient to purchase. Nobody has [o ativo], the positioning is light. And it was a sector that everyone had,” she says.

Master’s Gala agrees that retail must “resurrect”, as well as other asset classes that benefit from lower interest rates. “I think Selic below 10% is another story,” she says.

Along these lines, the economist also sees a chance of a good performance for small caps, companies with low market capitalization, since most of these companies are linked to the domestic economy.

Furthermore, due to their size, they also have more room to grow, which provides opportunities for greater returns for investors.

“I think that in 2024 we will have growth that is much more concentrated in consumption and the domestic market, and less focused on commodities. Agribusiness, for example, grew more than 10% this year, and I don’t see that repeating itself next year “, says Gala.

Manager Marcos Kawakami, from BNP Paribas, says that, with the expected slowdown in economic activity around the world, and the consequent drop in demand, commodity prices tend to fall, which is negative for the profits of companies exporting materials -cousins.

Added to this, a possible appreciation of the Brazilian exchange rate will also be negative for exporters, since these companies’ sales are made in dollars, and the depreciation of the American currency ends up affecting these companies’ profits.

“So, when we segregate exporting and domestic companies, we prefer domestic companies”, says Kawakami.