Stock market has worst first quarter since 2020 – 03/31/2023 – Market

The Stock Exchange recorded the worst first quarter since 2020 at the beginning of 2023, when the pandemic arrived in the country. The beginning of this year was also the fourth worst first quarter since 1995, the first year after the Real Plan.

The last few months have been marked by many turbulences and fluctuations, with the Ibovespa close to 115,000 points in January, but reaching 101,000 points at the end of March.

The Ibovespa accumulated a fall of 7.1% between January and March of this year. Since 1995, the worst first quarter for the index was 2020, the year that marks the arrival of the Covid-19 pandemic in Western countries. In that period, the drop was almost 37%, according to a survey by the TradeMap platform.

Still according to the survey, the second worst fall was registered in 1995, of almost 32%. In the first quarter of 2013, the decline was 7.55%.

The exchange rate followed the international trend, where the markets performed more positively. The dollar fell 2.9% against the real in the first quarter. After reaching the level of R$5.45 at the beginning of January, with uncertainties regarding the government of President Luiz Inácio Lula da Silva (PT), the quotation ended the quarter at R$5.06.

In the interest rate market, there was also a lot of oscillation. But compared to the end of 2022, there was a drop in both shorter and longer maturities.

In contracts for January 2025, the rate increased from 12.66% per annum on December 29, 2022 to 12.01% this Friday (31). For January 2029, the decrease was more modest, from 12.66% to 12.51%. But in the two maturities, the rates came close to 13.50%.

In the view of analysts, the Stock Exchange felt more the noise caused by President Lula’s criticism of BC (Central Bank), and the uncertainties about the new fiscal rules. Two themes that guided most of the investors’ decisions in the period.

For Rodrigo Moliterno, Variable Income director at Veedha Investimentos, the year began with a combination of good news from abroad, such as the reopening of the Chinese economy and the deceleration of inflation in the United States, with a kind of initial “honeymoon” with the new government that took office in Brazil.

“This scenario helped a lot, especially commodity companies, which have a large weight on the Ibovespa”, says Moliterno. In January, the Ibovespa came close to reaching 115 thousand points.

According to the analyst, February was marked as the month of the “perfect storm”. He recalls that the data showed an acceleration of inflation in the US in January, and the market began to question the new government’s fiscal policy, while Lula began a cycle of criticism directed at the Central Bank, due to the high interest rate.

For Leonardo Piovesan, an analyst at Quantzed, the government’s way of communicating about fiscal policy caused interest rates to rise at various times during the quarter. “This ends up hurting the Exchange a lot”, he says.

Piovesan recalls that the Small Caps index, which includes stocks with less liquidity than those listed on the Ibovespa, had an even worse performance in the quarter, with a drop of 9.5%.

Werner Roger, founding partner and director of investments at Trígono Capital, says that high interest rates have led some companies to file for bankruptcy.

For him, this tends to get worse, since there is no prospect that inflation will return to a level close to the target of 3% per year. “I already see this convergence as a challenge even for 2024”, says Roger.

Ibovespa’s performance went against the grain of what was seen in New York. Fernando Bento, president and partner at FMB Investimentos, points out that the S&P 500 index, which serves as a parameter for the Brazilian market, rose by more than 6% in the quarter, despite the high volatility.

“The Nasdaq was even better, it rose more than 16%. This is a positive side effect of the banking crisis in the United States, which should restrict credit, and facilitate the control of inflation, without the need for a very intense increase in interest rates”, says Benedict.

March was the month in which oscillations were strongest for the Ibovespa. The index started the month at around 104,000 points, and after the statement released by the BC shortly after the interest rate meeting, it reached the lowest level of the year, below 98,000 points.

The recovery soon followed, with a sequence of five highs that lasted until last Thursday (30), when the Minister of Finance, Fernando Haddad, announced the new fiscal rules. The stock rose nearly 2%. But this Friday (31), the gains from the day before were practically zeroed out, with the Ibovespa closing at 101,882 points.

Among the shares, the great positive highlight was Embraer’s common stock. “The company made profound changes in 2022, and delivered very optimistic projections for 2023”, says Piovesan, from Quantzed.

All analysts highlight the Americanas case. The retailer’s common stock has lost almost 90% of its value since the announcement of accounting inconsistencies, in January, which resulted in a BRL 40 billion request for bankruptcy.

Americanas shares were withdrawn from the Ibovespa in January. Among the stocks that remain in the index, the worst performer of the quarter was Hapvida’s common stock, which fell more than 48%.

Much of this drop was concentrated shortly after the release of the results for the fourth quarter of 2022, when the company presented a loss of more than R$ 300 million. “The company has problems in its capital structure and is heavily indebted”, says Piovesan.