November came to an end, a month full of emotions and uncertainty in the markets which began its first rounds by timidly recovering from the blow to prices in the last weeks of October, but after the result of the ballot, it resumed its upward trend, reaching new highs both in the Merval as in the sovereign bond curve.
Something similar happened with financial dollars. During the first rounds of the month and until the Friday before the runoff, the currency remained mixed, trading at values very similar to those of October (around $880). After the victory of Javier Mileithe following days, the dollar reached a peak higher than the $1,000but it quickly began to fall and the weight appreciated again to the levels of $850 approximately. To a large extent, the collapse of the dollar would be explained both by the elimination of the dollarization scenario with the resignation of Emilio Ocampo as president of the BCRA and by the extraordinary liquidation of exporters under the 50/50% Export Increase Program (PIE). .
In this context, What can we expect for December and looking forward to 2024? There is consensus in the market that difficult months are coming, where the new government will have to make complex decisions seeking to achieve fiscal balance. Furthermore, the futures market is already pricing in a devaluation and this is also reflected in the bond curve. Dollar Linked.
Furthermore, considering the recent comments that have been made – for example, that we could be going through a period of prolonged stagflation – it might be a good time to take another look at the yield curve. CER bonds and move away a little from those dollarized instruments.
The CER index is the Reference Stabilization Coefficient which is calculated every day by the Central bank, and measures inflation based on the Consumer Price Index. CER bonds, then, are neither more nor less than bonds that adjust for inflation. This characteristic makes them attractive to investors since they ensure a return greater than or equal to inflation measured by the CER. Additionally, many of these bonds also pay a small additional interest coupon.
In the market, there are currently several options that adjust for CER, between short- and long-term sovereign bills and bonds. The opportunity seems to be in the middle part of the curve, that is, in TX26 and TX28 (with maturities in about three to five years).
In any case, an option for investors seeking exposure to this adjustment (but with greater diversification) would be to lean toward Mutual funds (FCI) CER, which come had returns of over 20% in the last month.
FCIs allow a group of people with similar investment objectives to have professional management that is responsible for implementing the necessary strategies to achieve that objective, while safeguarding the assets in which they invest. In this case, the objective of The FCI CER is to replicate and surpass inflation.
Among the main advantages for an investor, we can find its ease of access and the simplicity of its operation. Due to their structure, they allow access to alternatives that perhaps retail investors would not be able to otherwise. They have no expiration date, and their daily value is public. Its liquidity and the diversification of its portfolio helps minimize risks, which is clearly one of its attractions.
In summary, inflation is expected to accelerate again in the coming months and remain high for a prolonged period of time, while the main macroeconomic variables adjust. And in this context, one of the most attractive investments for a retail investor can be the FCI composed of assets that adjust by CER since, in this way, they will be accessing a diversified fund managed by a Management Company, with the objective of be covered in a scenario of high inflationary pressure without losing the value of the pesos.
PPI Digital Client and EAMS Manager
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