The investment strategy committee of Itaú Unibanco that before suggested maintaining a neutral position in the domestic stock market, now recommends a position above neutral in August.
The team recommended maintaining a neutral position in the domestic stock market and advised a position above neutral (+1, on a scale ranging from -3 to +3) in August. The allocation was increased to 9.3% in the portfolio of the conservative investor profile that buys stocks, 18.7% in the portfolio of the moderate profile, and 21.8% in the portfolio of the aggressive investor profile.
The institution’s financial committee states in a report signed by Chief Investment Officer Nicholas McCarthy that they decided to increase the allocation in Brazilian stocks after the beginning of the interest rate cutting cycle. The team says that historically, monetary easing cycles are the most favorable for equity investments in the country, as they boost the economy, lower companies’ borrowing costs, and enhance the relative attractiveness of equities compared to fixed income.
“Furthermore, after a long period of weak performance, the stock market is trading at heavily discounted multiples, not only compared to its long-term average but also in comparison to its emerging market peers,” it states.
“Although Brazil remains on the radar of international investors as an attractive buying alternative, the flow of foreign investment continues to be significantly below levels seen in recent years, which could gain momentum with a potential influx of funds into emerging markets as a whole,” it says.
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