Adjustments in monetary policy and a revision of fiscal targets reverse optimism.

The expectation for interest rate cuts abroad, coupled with some calmness in the domestic economic scenario, propelled the Ibovespa to 134,000 points by the end of 2023 and led analysts to foresee additional gains for the index in 2024. However, throughout the year, these and other potential bullish triggers for the stock market were put to the test, causing the market to see limited room for gains.

At that time, the average of the 22 projections gathered by Valor placed the benchmark at 144,200 points by the end of 2024, an increase of 7.46% compared to the 134,185 points recorded by the index on the last trading day of the year. But so far, the index has accumulated a 7.36% decline for the year, reaching 124,306 points, and executives show greater difficulty in identifying positive triggers for the stock market in the short term.

The global macroeconomic factor was the main reason we saw the market more optimistic at the end of 2023 and for the adjustment in expectations, especially throughout the first quarter.

One of the main consequences of the repricing of U.S. interest rates is the outflow of foreign capital.

Non-residents, who in the last two months of 2023 made substantial investments in the Brazilian stock market with the prospect of monetary easing both in the U.S. and Brazil, began to register net outflows this year.

It was not only in the U.S. that market participants began to expect a tighter monetary policy: the same occurred in Brazil. At the end of 2023, the market estimated that the Selic rate would end this year at 9%, according to the median of expectations. Now, the median is 10%.

Although recent inflation readings have not shown significant negative surprises, there is market caution regarding the Central Bank’s stance from next year onwards. The possibility of a Central Bank more lenient with inflation has affected expectations for the IPCA: while at the beginning of the year, the Focus showed a median projection of 3.50% for 2025, it is now at 3.74%.