Dollar rises, stock market falls. This is one of the first lessons for those who follow the Brazilian financial market. And the month de Abril followed this teaching to the letter.
The American currency appreciated by 3.51% and led the profitability ranking in the period. Ibovespa had a negative return of 1.70%. The S&P 500 was also in the red: -2.40%.
Year to date, the direction of the dollar and the stock market is also opposite: the rise in 6.83% in the exchange rate is almost proportional to the size of the drop in 6.16% of the stock market since January. In this interval, the S&P 500 still accumulates an increase of 5.57% – happy for those who have an ETF that tracks the American stock market, such as IVVB11, since the gains in the exchange rate and the index are added to this.
In general, the movement in Brazil reflects the lack of appetite among foreign investors – who stop investing dollars here, helping to bring down the real.
Data from B3 show that the flow of external capital into already listed shares was negative by more than R$10 billion in April alone, until the end of last week. In 2024, this account is in the red by almost R$35 billion.
To give you an idea, in 2023, foreigners entered around R$45 billion into the secondary market, after contributing a record volume of just over R$100 billion in 2022.
The question that remains is: after changing hands at the beginning of the year, what to expect in May – a month traditionally known for the “flight of foreigners”?
Pedro Coutinho, partner at The Hill Capital, responds: “It is necessary to monitor whether there will be an entry of foreign capital, giving impetus to the local stock market”.
May is coming
“Sell in May and go away” is one of the best-known adages in the financial market. O sell in may and go away refers to a 19th century custom, when English bankers, businessmen and aristocrats left the market aside to leave London and enjoy the beginning of summer.
Not that this determines anything in the real world. But it doesn’t hurt to look at Ibovespa’s past to polish the crystal ball.
A survey by Elos Ayta Consultoria, at the request of InvestNews, shows that since 2019 the Brazilian stock market has been recording positive May months. In contrast, between 2010 and 2018, the fifth month of each year was always negative (see graph below).
Jason Vieira, economist at MoneYou, jokes: “The ‘May sale’ has been going on since the beginning of the year.” And he predicts that the coming period should be marked by an even smaller financial volume. Heat waves, apparently, only occur in atmospheric climates. In the financial market, winter sets in.
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