Despite a relatively good start in the last two weeks, in the recent days IBOVESPA has paired its games and closed august with a loss of 2.48%. IBOVESPA’s contrasting performance to other emerging and developed markets is mainly due to internal political noise, fiscal fears, and increasing inflation. All of which, have forced the BCD (Brazilian central bank) to adopt a more hawkish stance, increasing interest rates at a faster pace than previously expected, negatively impacting equity valuations.
On the international front, we saw Jerome Powll, the fed chair, talk at the Jackson hole conference, which this year was a virtual meeting far away from the snow peaked mount Titon. He acknowledged the asymmetrical risk of removing monetary stimulus at an overly aggressive pace. Powll and most members of the fed believe that inflation is transitory, and that removing monetary stimulus, be it through rising interest rates, a reduction in quantitative easing, or forward guidance would overly damage the economy and jeopardise the recovery.
Written By: Bruna Zarzur
Edited By: Anna Kissajikian