Comitê de Investimento Internacional - Janeiro/26

2026 Market Outlook and Investment Strategies

Introduction to the Meeting

• The speaker wishes everyone a Happy New Year and thanks participants for their involvement.

• The meeting aims to be concise, targeting a duration of 40-45 minutes, covering various topics including variable income, economic outlook, fixed income, and a special theme.

Market Scenarios for 2026

• The base scenario predicts a market increase of 15-20%, termed as "shock capitalism," linked to tax cuts and strong fiscal incentives from Trump’s policies.

• Anticipation of Federal Reserve interest rate cuts is expected to positively impact the market historically.

• A strong investment cycle in artificial intelligence is projected to benefit small-cap and mid-cap companies.

Potential Risks and Negative Scenarios

• There is a 30% probability of political power loss leading to reversed reforms, which could result in flat S&P performance or declining Nasdaq values.

• A negative scenario involving a credit crisis has been assigned low probability but remains on the radar.

Early Trends in 2026

• Initial trends show that despite only two weeks into the year, some clear market movements are emerging.

• Notably, the "Magnificent Seven" tech stocks have started weakly this year, continuing trends observed since December.

Shifts in Stock Performance

• Growth stocks lagged behind while value stocks rose by 3%, indicating a potential reversal in long-standing trends favoring growth over value investments.

• The S&P index increased by 2%, but an equal-weighted version saw a higher rise of 3.2%, suggesting shifts away from large tech stock dominance.

Small Caps and Emerging Markets

• Small-cap stocks have risen by 5.5% this year; this trend began at the end of last year and indicates growing investor interest outside large caps.

• Emerging markets are also performing well with an overall increase of 5.9%; Brazil's gains are attributed more to global trends than local fundamentals.

Commodities Performance

• Gold has risen by 6.6% while uranium has surged by an impressive 21%, highlighting significant movements within commodity markets early in the year.

Investment Strategies and Market Insights

Performance of Investment Portfolios

• The speaker highlights the strong performance of various investment portfolios, noting that the defensive portfolio has risen nearly 12% this year, commodities by almost 11%, and artificial intelligence investments by 10%.

Valuation Trends in the Market

• Discussion on market valuation indicates a slight decline in the price-to-earnings (P/E) ratio due to recent earnings per share data over the last 12 months. Despite this, companies are experiencing robust profit growth.

• The current P/E ratio is around 22 times earnings, which is considered reasonable—not overly cheap or expensive—indicating no bubble in the market.

Earnings Projections and Market Sentiment

• Positive projections for future earnings are illustrated with a steep upward trend for expected profits in 2025 and 2026, supporting overall market optimism.

Portfolio Allocation Strategy

• The "Best Ideas" portfolio has increased by 6% this year. The focus remains on sectors like artificial intelligence while avoiding certain areas such as medical sciences and technology outside AI.

Breakdown of Asset Allocation

• The investment strategy consists of six blocks; one significant block includes gold and Bitcoin, representing a quarter of the portfolio. This allocation has been beneficial over three years.

• Introduction of GDX (an ETF for gold miners), which tends to outperform gold prices due to operational leverage when commodity prices rise. A reduction in Bitcoin exposure was also noted due to its underperformance.

Focus on Technology and Energy Needs

• Increased positions in Google and copper ETFs reflect a strategic response to rising energy demands associated with artificial intelligence investments.

Cyclical Sectors and Defense Industry Investments

• Emphasis on cyclical sectors within the U.S., anticipating strong economic performance through 2026.

• Dual exposure to defense industries in both Europe and the U.S., capitalizing on increasing military expenditures across these regions.

Global Diversification Strategy

• Approximately 35% of the portfolio is allocated outside the U.S., including emerging markets but avoiding specific countries like China due to unfavorable fundamentals.

• Continued diversification efforts are highlighted, particularly through positions in gold and Bitcoin as well as other global assets despite skepticism about specific international markets.

This structured overview captures key insights from the transcript regarding investment strategies, market valuations, sector performances, and global diversification approaches.

Performance Overview and Economic Insights

Performance Against S&P 500

• The return for the year is at 19%, outperforming the S&P 500 comfortably, although 2025's performance did not meet expectations due to complexities faced that year.

• A detailed breakdown shows strong performances over various periods: a defensive portfolio achieved a 67% return, while commodities saw a 63% increase in the last twelve months.

Macroeconomic Context

• Transitioning to macroeconomic discussions, significant data from the U.S. and Europe were summarized following the last committee meeting in December.

• No major changes were made to annual macroeconomic projections; updates are expected in future meetings as more positive data emerges.

U.S. GDP Growth Insights

• The third-quarter GDP growth rate was reported at an annualized 4.3%, marking the best performance since Q3 of 2023.

• Comparisons between Biden and Trump administrations highlight differing economic impacts: Biden's era focused on government spending with less business-friendly policies, while Trump's administration emphasized pro-business strategies.

Government Spending Dynamics

• Recent GDP growth was driven by defense spending rather than broader governmental expenditures, contrasting with previous trends under Biden where government spending contributed significantly to GDP.

• Current GDP reflects stronger consumer activity and business investment compared to earlier periods, indicating a shift towards a more consumption-driven economy.

Labor Market Analysis

• The unemployment rate decreased from 4.6% to 4.4%, but this drop was primarily due to fewer people actively seeking employment rather than increased job creation.

• Job generation remains weak overall; private sector job growth continues to decline despite some stability in healthcare-related employment sectors.

Inflation Trends

• Recent Consumer Price Index (CPI) figures showed better-than-expected results, indicating potential improvements in inflation metrics moving forward.

Inflation Trends and Economic Indicators

CPI Analysis and Shutdown Impact

• The Consumer Price Index (CPI) for November was reported at 2.8%, significantly below the average of 0.23% observed throughout 2025, indicating a methodological issue due to the government shutdown.

• During the shutdown, the Bureau of Labor Statistics ceased price collection, leading to reliance on outdated data from August for various cities, which skewed inflation readings.

• The CPI figures for October and November were influenced more by these methodological challenges than by actual decreases in inflation rates; recent data shows a return to normal levels with a CPI of 0.31%.

• Upcoming Core PCI calculations will still reflect numbers affected by the shutdown, suggesting that future inflation reports may show normalization as they won't be based on "polluted" data from this period.

Manufacturing and Services PMI Insights

• The Manufacturing PMI remains below 50 for over three years, indicating contraction; however, decreasing inventories signal potential increases in production in upcoming months.

• Export growth from 46.2 to 46.8 alongside declining imports is seen as positive for GDP performance, reflecting effective economic strategies under Trump's administration.

• The Services PMI showed strong new orders and employment growth returning to expansion levels (52), suggesting increased consumption and controlled inflation moving forward.

Global Economic Context: China and Europe

Chinese Economic Data

• China's exports improved from 1% to 6%, although still low compared to historical standards; manufacturing and services PMIs are above break-even but retail sales growth remains weak at only 1.3%.

• Inflation in China rose due to temporary food price increases; core inflation remained stable across previous months despite fluctuations in food prices affecting overall metrics negatively during comparisons with last year’s low base values.

European Economic Developments

• Germany reported its highest manufacturing orders since 2016, attributed largely to government contracts following significant fiscal stimulus measures implemented last year (500 billion euros). This indicates recovery signs within German industry after prior downturn expectations were revised positively with a production increase of 1.8%.

• Eurozone inflation is expected to converge towards targets this year, potentially falling below them due to various factors including energy prices and food costs impacting overall economic stability across member states.

Economic Insights on Inflation and Interest Rates

Current Trends in Eurozone Inflation

• The Eurozone is converging towards its inflation target, with expectations of reaching 2% this year, which may allow for interest rate cuts.

• Recent manufacturing orders in Germany have peaked, indicating a significant increase not seen since 2016, suggesting positive industrial activity.

Japan's Economic Challenges

• The Bank of Japan has raised interest rates recently and is expected to continue doing so, focusing heavily on inflation data.

• Unlike other countries, Japan struggles to maintain positive inflation rather than just keeping it low; current headline inflation stands at 3%.

• Tokyo's inflation has decreased from 2.8% to 2.13%, indicating a potential downward trend in prices despite previous fiscal measures aimed at boosting the economy.

Wage Dynamics and Future Projections

• Japan’s wage structure is tightly controlled by unions, which plays a crucial role in sustaining positive inflation levels and could influence future interest rate adjustments.

• The Japanese economy has transitioned from deflationary pressures to maintaining positive inflation since 2021 through various fiscal packages.

Nominal GDP and Economic Recovery

• A recent revision of Japan's nominal GDP shows an upward adjustment post-benchmarking, reflecting stronger economic growth since 2020 due to fiscal interventions.

• Japan's unique economic situation presents different interpretations compared to other nations as it navigates out of a prolonged liquidity trap.

Global Interest Rate Landscape

• Internationally, there have been minimal changes in the fixed income market; the yield curve remains stable with slight movements observed primarily in shorter-term rates.

• The yield curve indicates that while short-term rates are flattening due to past rate cuts, long-term rates remain relatively unchanged.

Market Reactions and Government Strategies

• Countries are experiencing varied responses regarding interest rate policies; some are cutting rates while others maintain them without significant shifts noted recently.

• There is ongoing uncertainty within the market as governments attempt to manage high mortgage rates while stimulating the housing sector through lower interest strategies.

Market Reactions and Economic Indicators

Initial Market Reactions to Rate Cuts

• The initial reaction to the 10-year bond yield showed a tightening after rate cuts, but it later opened up again, indicating market volatility.

Economic Events Impacting Rates

• Key events included a government shutdown and issues in private credit funds leading to bankruptcies, which raised concerns in the financial markets.

Inflation Expectations and Bond Yields

• Despite a third rate cut at year-end being perceived positively, the 10-year yield continued to rise slightly due to inflation expectations remaining uncertain.

Long-Term Concerns in the Market

• The 30-year bond yield is concerning as it remains high compared to earlier in the year, reflecting long-term worries about U.S. debt levels increasing significantly.

Currency Dynamics and Global Investment Trends

• A shift is observed where countries are reducing dollar-denominated assets while investing more in gold, impacting both currency strength and long-term interest rates.

Commodities and Oil Market Outlook

Commodities Performance Overview

• There’s an optimistic outlook for commodities like gold and platinum as they show upward trends amidst broader economic conditions.

Venezuela's Political Changes Impact on Oil

• Recent political changes in Venezuela may not signify a regime change but could lead to increased foreign investment opportunities within its oil sector.

Infrastructure Challenges Affecting Oil Production

• Venezuela's oil production infrastructure has deteriorated over decades; thus, even with potential investments, significant increases in output will take years.

This structured summary captures key insights from the transcript while providing timestamps for easy reference.

Ecopetrol and Pemex: Current Situations and Market Strategies

Ecopetrol's Diversification and Resilience

• Ecopetrol is a highly diversified company, which allows it to maintain stability; if margins decrease in sales, improvements can be made in refining or extraction.

• The company has geographical diversification, operating in multiple countries including the United States.

Political Landscape Impacting Operations

• Upcoming elections in Colombia may lead to significant government changes, potentially affecting Ecopetrol's operations and strategies.

• The current Colombian government's low popularity suggests a likely shift that could reduce U.S. pressure on Colombia regarding oil policies.

Pemex's Position and Challenges

• Pemex is currently in a better position due to favorable relations between Mexico’s president and Trump, despite the president's leftist tendencies.

• However, Pemex bonds have become expensive, making them less attractive for investment; thus, there is a strategic withdrawal from investing heavily in Pemex.

Investment Strategy Adjustments

• The investment focus remains on Ecopetrol while reducing exposure to other companies like Occidental due to rising costs and lower returns.

• The portfolio strategy emphasizes maintaining short-term investments with maturities up to 5 years while cautiously observing market trends for potential adjustments.

Conclusion of Discussion

• The speaker thanks attendees for their presence, indicating the end of the session while reiterating commitment to maintaining diversified sector investments.