Double criteria for investments in January

It is unlikely that returns as positive as those seen in November will materialize in the initial months.

The logical recommendation is to remain cautious, but it could be an opportunity to position yourself for the medium term if you think of an optimistic scenario, especially in the debt market.

The markets closed 2022 amid uncertainty and December turned out to be another month of losses.

The main spoiler was undoubtedly the US Federal Reserve (Fed), which in the first week reduced expectations of a change in position and a reversal in rate hikes this year.

The economic information does not help too much either. Most of the data shows a clearer slowdown.

Just yesterday, the industry purchasing managers’ perception indicator (ISM) presented a level of contraction for the second consecutive month and remained below 50 points (a level consistent with a drop in activity in the sector).

Fear among investors also includes the possibility that the Fed’s stance will be tougher than is needed to moderate inflation.

Internationally, the news in Asia has not been good either. China faces the problem of millions of infections due to the relaxation of the zero Covid policy. Japan has taken a turn in its monetary policy that has upset local markets and has generated tension at a global level.

I don’t see how things can change much in January, which is why we see the start of the year in markets with little volume and erratic movements. Do you want an example?

Yesterday the stock markets opened the day with significant upward movements; However, at the end of the day, the publication of the minutes of the last meeting of the Fed in December, which showed the resolution of its members to fight inflation and the concern that market participants have a wrong perception, they ended up moderating the rise. In the accumulated of the year the yields are marginal.

Volatility will remain relatively high and investors will remain sensitive to news, mainly those related to the performance of the economy (in the United States we should see bad data due to the climate disaster at the end of the year).

The magnitude of December’s decline in inflation will have to be confirmed and corporate financial reports should excite investors.

In all cases the recommendation is to be cautious.

However, thinking of a broad horizon, whether it is the end of the year or 2024, this month may represent a good opportunity to reposition portfolios.

We are not expecting another year like 2022. Inflation seems to drop over the course of the year and will ease tension in the debt market.

From our point of view, the most likely surprise in light of the information we have on the table today is that the drop in inflation is greater than expected.

In such a scenario the punishment of the bags could be moderated.

The double standard of caution and taking some risk is valid. It means that there is an uncertain short-term scenario and the possibility of a more optimistic picture going forward.

The beginning of the year and perhaps the entire month of January will see a very sensitive market and dependent on economic data, both from the end of 2022 and from the beginning of this year.

For now, we maintain the idea that rates will continue to rise and until the data and the Fed itself in February set a pattern again, there will be no significant changes.

But not if your goal is set at 12 months or longer. The level of long-term rates, especially abroad, as well as the dejected multiples on the stock markets (the cheapness of shares, to put it more clearly) sound reasonable for the construction of positions.

The investment is a dynamic process that is perverted by wanting to square it in the calendar year, that gives rise to the title of this article.

Perhaps what I can tell you is that a change in the scenario that hurt the markets a lot is brewing and this may imply opportunities.

*The author is CEO of Invex Operadora de Sociedades de Inversión.

perspectivas@invex.com

Twitter: @invexbanco