Luis Stuhlberger: Trump Victory Would Boost Yuan Short PositionsVW Staff
Verde got marginal gains in fixed income and currencies, and small losses in the book stock, coming mainly from the global exposure.
The vote on the first significant reform of Temer government approaches, and the optimism of the markets for the outcome is palpable. Such optimism was reinforced recently by the results of the municipal elections, which somehow chancel aram the direction of change of government. Still, the belief that the ceiling of expenditure will force a permanent adjustment by politicians should not clash with reality for a few years, but when such a collision happen, we believe that the result will be the strengthening of the roof, but the contrary. Brazilian lawmakers seem to have understood even if the ceiling as proposed will make all federal government spending tend to zero, except for the security, health, education and salaries of servers. The elegance with which the economic team is selling this fact to the Congress is to take the hat. In view of this, our skepticism with Brazilian fiscal trajectory in the medium term remains.
The global market, which until the end of August was an unshakable calm, saw the last month a return of volatility. Two phenomena are behind this, both with important implications: (i) the perception that the firepower of global central banks is more limited, corroborated by recent signs of Japanese BOJ and European ECB; (Ii) the troubled American election, where the Trump factor adds a difficult uncertainty component to be measured. Although good election monitoring models indicate a higher probability of Hillary Clinton’s victory, the recent experience with Brexit and Colombian referendum leave us a little less confident in the predictive power of such models. A victory Trump should cause volatility in the currencies of emerging countries (including Brazil) and benefit from our short position in the Chinese Renminbi, the increasing likelihood of global trade disputes. On the other hand, Hillary Clinton’s victory should mean continuity of the status quo, benefiting American stocks, and making room for the Fed to follow the path of higher interest rates in December, which somehow should also benefit the dollar.
Verde FIC FIM – Breakdown – Fund Results
Multimarket strategy flagship launched in 1997, is one of the largest and oldest Brazilian hedge funds. It operates in the Brazilian and international stock market, fixed income and currencies under the management of Luis Stuhlberger.
Fund for the general public, subject to the minimum values of initial application, permanence and constant movement in the prospectus.
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