international scene
The war between Ukraine and Russia leaves us with a big question mark, since many raw materials from those regions could decrease in supply. However, it is striking that the flow of traffic in the Black Sea has only been reduced by 6% after the war. Obviously someone is buying what Russia produces, the economic sanctions have been declared, but they are not being executed and this generates a great contribution to the general confusion. It would give the impression that many raw materials discounted upward prices that cannot be sustained in the medium and long term.
The covid in China forced the quarantine of nearly 400 million people, this will generate a significant slowdown in the world economy. When the world was growing and raw materials prices were climbing rapidly, China was growing at a rate of more than 6% per year, a rise of 4.4% was forecast for this year, post covid it could grow at a lower rate.
This poverty effect in the Chinese economy could cause the prices of raw materials to take a downward path. On the other hand, the devaluation of the Yuan and the strengthening of the dollar, they raise the price of raw materials, which makes a drop in the price of grains more likely.
The rise in the rate in the United States pushes the price of the dollar up internationally. A dollar strengthened by a greater demand to place interest rates is an enemy for the price of raw materials. America becomes a fund hoover.
Everything suggests that the short-term rate would rise to levels of 3.0% per year, while the rate of return on 30-year US treasury bonds would be between 3.5% and 4.0% per year. The president of the Federal Reserve announced that all necessary measures will be taken to reduce the high levels of inflation.
local scene
The Government faces a very difficult scenario, Argentine commodities are likely to start a big profit-taking, this will affect not only tax revenues, but also the currencies of the Argentine Central Bank.
In Brazil, short-term rates rose to 12.75% per year and the real is below 5.0 reais per dollar, which indicates that it is receiving capital from abroad, something that should also be happening in Argentina since the alternative dollars are located very close to the price of the solidary dollar which is trading at $203, while the alternative dollars are trading around $210.
The value of the dollar is at a very low level and it is a good time to invest in this instrument. The euro is falling internationally, but at the moment we do not advise buying this asset. Inflation in Europe stands at 7.4% per year, in Great Britain 9.0% per year and in the United States 8.3% per year, however, interest rates in Europe do not reach 1% per year, while in the United States, placed at 3 years, you manage to place the money at a rate of 2.9% per year. As rates are negative compared to inflation, we believe that prices may continue to rise in the world, which sooner or later will also impact Argentina.
The wholesale dollar for the month of May would increase from around 4.1% to 4.3%, therefore, it would leave a very high inflation floor for the month, the inflation outlook for May would be at a 5% floor. At this rate of inflation, by the end of the year, we would end up with a price increase of around 70% per year.
This year Argentina would have a growth of 2.5% per year, but the biggest problem appears for the year 2023, the lack of investment in the current year makes us doubt that the country can grow next year.
Companies should work to increase the participation of their products in the market, expanding the range of products, mostly at prices lower than the current ones, given that we do not see a scenario of growth in real wages.
You have to take advantage of the current financing rates, since they are still lower than the inflation rate, lower than the projected devaluation rate and you have to make an evaluation of the inflation of your own company, sales prospects, number of days to the collection of the merchandise sold and payment terms to suppliers.
what to invest in
We continue to recommend the fixed term adjusted for inflation and the purchase of global bonds in dollarsespecially those that mature in 2030 and 2038, these bonds can be used to obtain financing under the surety modality, today with a rate of less than 50% per year.
Stocks and cryptocurrencies are not the same, but both assets today are considered very risky, given the probable rise in the short-term rate in the world and the strengthening of the dollar.
we continue recommending the purchase of properties at current prices, although the return on rents collected does not seem relevant, it is likely that with a new government in 2023 we will have a strong rise in real estate assets.
In summary, financial assets are experiencing high stress, which they will hardly be able to overcome in the short term. You have to buy thinking about collecting bonds in dollars to obtain good returns one year ahead.
The properties are a very good business, which will materialize in the medium term, since current prices are far from those observed during the years 2017/18. For those who have liquidity in pesos, the fixed term adjusted for inflation is a very good alternative.
Source: Ambito
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