Market Update: Multicrisis, De-Dollarization and Echoes from the IMF Spring Meeting

On Wednesday, April 26th, we hosted our monthly "Market Update" livestream about global markets with Marcelo Aagesen, Head of Global Markets, and Niraj Patel, Chief Equities Strategist, both from Itaú Private Bank International. The event also had Itaú Private Bank's Chief Economist, Gina Baccelli, who participated in meetings and events in Washington, as a special guest.

The discussion centered on the meeting hosted by the IMF and World Bank, known as the "Spring Meeting," held in early April in the northern hemisphere. In addition to the main program, banks also host various parallel events where they analyze the world's economic situation. According to Baccelli, there is a certain consensus that we are experiencing a multicrisis: social, climate, and geopolitical. The high public debt, especially in the US, is generating greater demand for social spending, a loss of confidence in institutions, political polarization, and a higher probability of supply shocks.

Economic policymakers will need to be more flexible, especially central banks, which will have to deal with more shocks than before. China and the US are at the center of geopolitical issues, with Ukraine being seen as the battleground for this dispute.

Other countries may emerge as points of tension, such as Iran and Taiwan. The energy crisis in Europe appears to have been overcome, but the region will need to deal with the need to increase defense spending and integrate more countries to become a third global power.

A narrative is being created about a weaker American currency, largely due to tensions and, especially, the geopolitical landscape. An increasingly influential third world is leading to a decrease in dollar investments and a diversification of portfolios, including more and more other currencies.

• Concern about the risks present in the global economy due to social, fiscal, geopolitical, and climate crises.
• Inflation is at its highest level since the 1970s, putting pressure on governments and economic policymakers.
• High geopolitical uncertainty implies global production reallocation and more resilient supply chains.
• Commodity prices are under pressure from a lack of investment and climate pressures, contributing to the increase in global debt.
• Concerns about the return of inflation to the pre-Covid 2% target require changes in target models to increase monetary policy flexibility.
• There is a fear among regional bank scientists that this is just the first of several crises caused by the misallocation of risk in a low-interest-rate environment.