Market Update Itaú Investment Committee Views

Last Monday, the 27th, we held our monthly live Market Update on global markets, with the participation of Marcelo Aagesen, Head of Global Markets and Strategy, Niraj Patel, Chief Equities Strategist, Alejandro Estevez-Breton, Chief Fixed Income Strategist, from Itaú Private Bank international, and Rodrigo Lopes, Variable Income Strategist at Itaú Private Bank.

At this meeting, the focus was on overweight asset classes, from the perspective of Itaú's investment committee, which meets monthly to decide the tactical allocations of model portfolios, based on the analysis of international and Brazilian macroeconomic scenarios. Recommendations made to clients follow these guidelines, always in accordance with the client's profile and risk appetite.

The discussion covered our outlook for US equities for 2024 – although we have a neutral allocation, what factors could change our view. Crucial factors including valuation, inflation and interest rates were also discussed, highlighting the need for a dynamic approach. The committee's strategy, based on dynamic adjustments and constant attention to risks, highlights a flexible approach in the face of continuous changes in the economic scenario.

Check out the highlights:

• More than 90% of ratings are between A and BBB, indicating high quality companies.

• History of low default rates due to robust business models.

• Bonds have an average duration of 6.8 to 7 years. They are relatively sensitive to changes in interest rates, especially compared to other bond classes.

• Despite recent challenges, the committee is optimistic about the future performance of this asset class.

• There was discussion about the potential impact of interest rate spikes, especially in relation to the Federal Reserve's next steps.

• Expectation that the peak in interest rates has already been reached, resulting in a favorable performance for investment grade bonds.

• Our specialists assessed the complexity and diversity of emerging markets, with an emphasis on the notable dominance in the financial and technology sectors.

• The significant discount compared to developed markets, and the outflow of resources and allocation margin are important technical factors.

• An analysis was made of the impact of the dollar on profits in these markets, highlighting the attractiveness of the bonds, focusing on the quality of the companies and the historical low default rates.

• Highlight the importance of bond duration and the ability of the asset class to face different scenarios.

• The driving factors for US equities in 2024 were discussed in detail, including valuation, inflation, and interest rates.

• Emphasis on right-time purchasing strategy and continuous risk assessment.

• Possible opportunity in the US real estate sector amid macroeconomic conditions.

• Optimistic assessment for emerging markets, taking inflation, interest rates and macroeconomic scenarios into account in strategies.

• Highlight the importance of a flexible approach and continuous adjustments to asset allocations, with a comprehensive vision for the coming year.

Watch the full video below:

Click here to read the portuguese version of this article.