With rising prices on the rise, only two local assets were able to beat inflation; dollar investments started 2022 in red
Investments started the year on the wrong foot. Between rising global inflation, expectations that the US Federal Reserve (Fed) will tighten monetary policy, and Russia’s invasion of Ukraine, there were few exceptions in the first quarter of 2022 that yielded positive results.
Even the one who bought dollars lost. Despite the fact that the US bill is considered by Argentines as a refuge of value, today the financial exchange rates are worth up to 6% less than in the first days of 2022.
For those who bought dollars at the end of January, the decline is much more marked: the MEP dollar fell from $225 to the current $187 (-20.3%); the cash with liquidation (CCL) from $230 to $190 (-21%) and the blue, from $222.50 to $203 (-9.6%). In the case of financial exchange rates, they are differences of $40 in two months, while the blue had a decrease of $20.
“The course of the dollar continues to be a surprise. In the midst of weeks of maximum international tension and political uncertainty at the local level, the free prices of the currency recorded significant cuts, reaching the area of $189-190. From the highs of the end of January, the cash with liquidity sank 18% and the MEP 15%. Even these movements led to the cost of the swap (conversion from MEP to cable) being less than 1%, something not seen in six months”, they indicated from GMA Capital.
The numbers in red are replicated in other investments. For example, most of the Argentine Deposit Certificates, known as Cedears, accumulate large drops. Between the drop in the CCL dollar and the drop in the performance of large international companies, only Barrick Gold and Petrobras accumulated profits of 22.8% and 20.8%, respectively. Both companies are linked to commodities that were fueled by the war.
Instead, Facebook’s Cedears sank 48%, followed by Netflix (-47.8%), Mercado Libre (-36.9%), Alibaba (-33.5%), Globant (-32.8%) , Tesla (-30.6%), Microsoft (-21.2%), Disney (19.9%), among others. However, for Lautaro Franco, PPI’s Digital Banking team leader, these numbers could become an opportunity. “The Mercado Libre price has suffered a very large drop in recent times, so it could be a good time to enter,” he considered.
Another case According to Charlie Bilello, the founder of the American company Compound Capital Advisor, in the first 48 financial rounds of the year the S&P500 index was down 11.8%. This is the fourth worst start to the year in history. The good news? Observing other similar events, the trend was reversed by the end of the year, with increases of between 37% and up to 64%.
Investments that are earning
While the world remains attentive to the progress of the war in Europe, in Argentina the eyes of investors continued to rest on the agreement with the International Monetary Fund (IMF). With rising prices on the rise, only two local assets were able to beat inflation: those that adjust for CER (ie inflation), which gained 4.3%; and Treasury bonds (Botes), with a real rise of 3.3%.
“However, dollar returns told a different story. Only the Bonares and Globales did not gain in hard currency, posting losses of 8.2% and 7.2% for their respective holders. On the other hand, those investors who bet on instruments in pesos, both in fixed income and in shares, obtained a greater profit from carry trade. Especially Botes, Boncer and Lecer, which had yields of 17.2%, 16% and 13.6% respectively in hard currency”, indicated GMA Capital.
For the coming months, there are some options for savers. For Ignacio Morales, president of Wise Capital, if an inflation of 56% is expected, investments in pesos should focus on bonds that adjust by CER, such as T2XR, TX24, TX28 and DICP. On the other hand, if one takes into account that the Central Bank is increasing the rate of devaluation of the official exchange rate, other assets to consider could be T2V2 and TV23.
Investments linked to oil, gas, cereals and gold could be an option if the investor projects that the war will last and affect the prices of raw materials. Meanwhile, due to the fall in shares, some companies have good entry prices.
Yes indeed. Economists stress that this year investors will have to operate with a cold head and taking into account investment objectives. “One of the most important issues when it comes to investing is being able to recognize the emotions of the market (and control your own). Perhaps that represents 70% of our chances of success when investing, ”Franco closed.