What Else? Por Que a Bolsa Continuará Subindo - Comentário Mensal Abril - 2025

Music Hello everyone, my name is João Luiz Braga, I'm an analyst here at Encore. I'm here to record the April video for you. Today is May 5th, 7:36 AM.

I usually record more at night. But today I'm going to record the video a little earlier for you. But let's get to it, folks.

Imagine that you and I, imagine the two of us here, we were allocators, right, and in the last 10 years, or even 15 years, we were discussing allocation, but not here, not here in Brazil. Imagine we were on Park Avenue at 58th Street in the United States, discussing allocation. Would we be talking about Brazil?

After so many sensational narratives for the United States, I think probably not, right? And that's exactly what is changing now, quickly, and that makes me very optimistic. All allocators, especially Americans, right?

Everyone became very comfortable, and rightly so, with being over-allocated in the United States in recent years. And now it's a more uncertain environment, right? Will they remain comfortable?

Or will this group on Park Avenue, or us there discussing an allocation, wouldn't we start thinking about "what else," right? What else is out there in the world? Does it make sense to remain so over-allocated in the United States?

And then, remembering that there's a country, whose prices are still ridiculously cheap, that is ending its interest rate hike cycle, that might undergo a major shift in political direction, just like Argentina went through, and Chile is currently experiencing, and that is outside of this tariff mess, right? This seems quite logical to me, right? And as everyone knows, a little bit of money coming to Brazil makes a big difference.

We're going to talk about this paradigm shift in this video, but we'll also talk about Trump, the United States, China, and Brazil. But first, let's start with an accountability update, as I always do. Last month, both in relative and absolute terms, was the best month in Encore's history in terms of performance.

Those who follow us know we were optimistic and allocated, and it worked out last month. The Long Bias, Encore Long Bias, rose last month—it depends on the FIC, right, but it went up somewhere between 14. 7 and 15.

1 percentage points. Encore Ações (Equities) rose 13. 2, while the Ibovespa went up 3.

7 and the SMLL 8. 5, right? So we significantly outperformed the Ibovespa for the month.

With that, Encore Long Bias is up almost 25% for the year, a little less, 24% and change, or Encore Ações (Equities) up 22% for the year, compared to the Ibovespa, which is up 12. 3% for the year, and the SMLL 18%. So it was a really good month.

We're happy here, but as a certain president would say, we have to keep this up, right? And we think that despite this whole rally, and so on, this is just the beginning of a cycle; the Ibovespa has barely risen, in fact. It's the start of an excellent cycle, and for those who want to give us the honor of managing part of their money, just visit our website: encore.

am (for Asset Management). encore. am.

Click at the top, there's an "Invest Here" button, and there you'll find all the platforms that distribute our fund. So that's it, folks. That's the short update; it was a very good month.

Let's move on. Let's start. .

. You know I keep looking over here because that's where my notes are, right? Let's start by talking about the United States, right?

And before showing graphs and such, I wanted to say something more, I don't know, more theoretical here, which is about Trump and about the uncertainty he has brought to investors there, That's kind of the basis of the call. And this has nothing to do with a political call, okay, folks? It doesn't matter if I or if you like Trump or not, okay?

So, first, to understand, not just stick to a shallow opinion like, "Oh, he's crazy," or "Oh, whatever. " First, let's try to understand what he wants. What does he want with all this, right?

For me, it's simple. The answer could be a bit more complex, but to simplify, I think, one, he does want to bring back some industries, especially some essential ones and so on. But what he really wants is to try to reduce—he wants to try to shift things, but I find that difficult—but at least try to reduce the speed at which China has been evolving in its potential quest for global supremacy, in short, a call on global cycles.

Ray Dalio talks a lot about this in this book here, right? This book here talks a lot about it, and the book is long, okay? I don't know if you need to read it.

The point is that he made a short video, about 45 minutes long, which I'll put here—for those on YouTube, I'll put the link to the video below— that explains this story of the cycle, of supremacy, and so on, very well. This video makes it very clear; it's very easy to understand what bothers Trump so much. And this involves, of course—there are a thousand ways to try to reduce the cycle— but it certainly involves trying to reduce the trade deficit with China specifically.

This is in his head, okay? Not necessarily in mine or yours. Anyway, in his head, it certainly involves reducing the trade deficit.

And it's obvious to me that Trump cares much less about those other countries that were on that bizarre poster board he showed there on Liberation Day. Does anyone really think he cares about that country that only has penguins there, or with a bunch of countries? It has nothing to do with that, right?

And then, as Daniel Ades from Kawa well said on the last podcast I heard with him and Thiago Salomão— a shout-out to both of them— it's that thing, if Trump gets there, it's all a method, right? If Trump got there and didn't raise anyone's tariffs, just put China at 100%, right? The next day, everyone would be complaining, "Man, that's absurd!

How can he do that? " and so on, right? When he applies it to everyone, then takes it off everyone and leaves only China, right?

Everyone says, "Phew, okay, that's better, not so bad," right? Like, it's a method, right? And, this strategy is very clear to us here.

I recommended here, in January, I think, if I'm not mistaken, Scott Adams's book, "Win Bigly," right? which I think is a better read than Trump's "Art of the Deal" to understand this strategy of him playing the madman, the chicken game, anyway, all of this is a method. It's nonsense, what I see many people say— it's nonsense to say that Trump backed down when he backtracks on tariffs.

It has nothing to do with it, because that was predictable and part of the strategy. The issue is there with China, which is still high up there, right? So, okay.

If that's the case, how are we doing, right? And what does this have to do with my optimistic call for Brazil, right? It's simple; there are two points.

The first is, he still hasn't achieved what he wants. And we can't say yet whether he will succeed or not. But that doesn't matter for the call.

What matters is point two: we can already say, with absolute certainty, that whether he succeeds or not, he has already added an element called uncertainty. Insecurity. And everyone saw this; it became very clear, right?

There are many ways I can prove this; one of them is this one here, which is the VIX. The VIX is the S&P volatility index there, right? The expected volatility, right?

Future volatility, right? Meaning, the higher it is, the more uncertain, right? So here it hit levels that, there was a day last year it also hit, which was a bit strange, but it hadn't hit since COVID.

And, another way to see it, besides the VIX—there are several ways, okay? —is this graph here, these two graphs from Goldman along with FactSet, what they do is the following: you first take this graph on the left. What is this here?

It took all the company results and gets the transcripts—the conference call, there they get the transcription— and searches for the word "incerteza" (uncertainty). The number of companies talking about uncertainty, of these 600, from the Stock 600, exceeded 60%. Look at the scale.

The further down, the more people talking. It's this axis here, right? That's it.

The last time they talked so much about uncertainty was during COVID. And before that, they hadn't talked about it so soon. The light blue line, just to explain, this is the earnings revision for these same companies, and you can see that, obviously, when uncertainty increases, analysts revise earnings downwards.

So look at how much companies citing uncertainty increased. And the one on the right is exactly the same, just looking at it differently, it's looking at analysts taking all companies from the same Stock 600, and you take those who revised upwards, which is the upgrade, and subtract those who revised downwards, which is the downgrade, right? And divide by the number of estimates.

And this, which is the light blue line, that's inverted relative to the other, hit minus 40. Meaning, many more, many more downgrades. Oh, I'm in front of the screen here, sorry.

There are many more downgrades than upgrades. The blue line is similar to the previous line, which is the number of revisions and such, which also trends downwards. So there you have it, the level of uncertainty the American market is working with is quite clear.

And so the question remains: Going back, we're at the meeting on Park Avenue at 58th, right? If things are so uncertain, does it make sense to be so over-allocated in the United States, as the entire world is? It's as simple as that.

So it doesn't really matter if Trump's strategy works out or not for this particular point of mine. What matters is that the method brings uncertainty. And uncertainty leads to diversification.

And here, remember, we are extremely undervalued, prices are super cheap, and under-allocated—nobody holds Brazil these days. But let's continue talking about the United States. Man, we're in a phase where it's difficult to analyze indicators, the data that comes out every day, that we keep an eye on here, it's very difficult to look at these short-term indicators because it's a mess due to the tariff war, because that caused the dynamics to change.

Whoever can, whoever could, bought, anticipated purchases, imports, all of that, which is the so-called "front-load" that I'll mention a few times throughout the video. The fact is that stronger data ends up coming out because of this, right? And I don't know if it makes sense, because, de-seasonalizing this type of data, it doesn't add up, because there's a new factor, which is the front-load.

For example, this graph here on the screen, This graph, it shows the "front-loading" we talk about here, right? What is this, right? It's net exports, meaning, downwards is net importation, in relation to how it contributes to GDP, and it was the lowest number since the end of World War II.

It was truly a gigantic import number, which is the front-loading. There's another way to show it that's also cool, which is this graph here. This graph is from Citi with Bloomberg, which is containers leaving China for the United States.

Then you look at the 2025 line; it was much higher than normal here; this data is very up-to-date. Obviously, it was the front-load here, folks importing what they could, and this data has already collapsed and may continue collapsing, right? So, it's obvious that stronger numbers appeared recently, including just today, data came out that had us looking at each other here.

Anyway, but that we, in a way, have to ignore because of that. But if very strong data appeared because there was front-loading, what will happen now? We might see data collapsing, right?

And that might scare a lot of people. We'll see. And another thing that started growing again, and which is quite curious— this data is also from today— actually, it was until last week, but it came out today, which is also from FactSet, that Goldman got, is a.

. . it's the same thing I mentioned about that other one, looking at the transcripts, the transcriptions of the calls and seeing how much was said about uncertainty, but it's about mentioning the word "recession.

" And look what happened, right? Recession, folks. It's rising, returning to numbers like during COVID, or like during the so-called "hard landing" era.

Remember that discussion about whether it was a soft landing or a hard landing, everyone talking about a possible recession. And I talked a lot here in the video about the so-called "Dollar Smile. " Those who have followed me for a while should remember.

The fact is that this ghost of recession has returned to haunt American investors, okay? One more reason for us to rethink whether that over-allocation in the United States makes sense, right? Because, let's face it, folks.

Again, imagine us having our Fund of Funds meetings in the United States, where we allocate money globally, there on Park Avenue, with whatever you want there. Remember the past, right? It made total sense for us to be over-allocated in the United States.

It wasn't a mistake to think that in the past, right? It was a sequence of American narratives there that did very well, that were working out, right? Since the App Store, when smartphones came along, a lot of exports of technology services.

Then there was Trump 1. 0, right, where he significantly reduced corporate taxes. Then there were the low interest rates during COVID.

Then there was AI, right? Man, AI was a spectacular narrative. When you saw NVIDIA selling a ton of chips, as it was selling.

And finally, now, the story of American exceptionalism. And then, I understand almost all the narratives; I think they make sense. But this one about American exceptionalism, I don't know, right?

Gavekal has an interesting call. They consider that this "U. S.

exceptionalism" might be one of the biggest investment bubbles of all time, right? This here is an article I saw through Gavekal, which I then went to find. This screenshot is mine, from the end of last year, from the Financial Times, talking about this: "the mother of all bubbles.

" So, let's agree, one can understand thinking like that, right? Because, look, I understand AI; you go there and see Nvidia's results going up and so on. I understand the Apple App Store; back then, Apple traded at a very low P/E, right?

Anyway, I understand those. But citing "U. S.

exceptionalism" as a reason for the United States to trade at sky-high multiples seems like nonsense to me. Because the United States is indeed exceptional. But what we need to see is if it became more or less exceptional, right, over time.

And then comes Deepseek that shows that maybe China isn't 3 years behind in AI compared to the United States; maybe it's not even 3 months. Then you think, "Man, could this exceptionalism, right, be right? " I, I don't know, right?

It's not very easy to say, right? And then, we go back to thinking if it's worth it or not to have such a big difference in multiples, to be so over-allocated there, and think about the "what else," man. The "what else.

" If we want to diversify globally, what's out there? I come back with the argument: there's a country that's super cheap, that's finishing its interest rate hike cycle. Oh, and a reminder, okay?

Since the end of the FHC era back then, in all the years that interest rates were cut in Brazil, in all of them, the stock market went up, okay? All of them. It could have this mega political turnaround, which I still don't think is priced in at zero.

It wasn't priced at zero. I'll talk more about this at the end of the video. And it's outside the mess of the tariff war.

Man, it seems like, you know, us there on Park Avenue, we'd be like, "Okay, let's put some money in Brazil. " Not that much, just a little. Just a little bit.

But a little bit already does all the damage, as we can see in this year's flow data, right? This year, the flow of money here to Brazil, it. .

. it. .

. reached about 10 billion positive, with foreigners putting money here. Then it went to almost zero in the first few days there of of this story of the.

. . after Liberation Day, of the tariff war.

The smart money, on that day of the drop, sold off quickly and so on. Since then, it has already bought 15 billion reais, which is nothing in dollars, nothing. It's a little bit of money, and even so, it caused all this impact on the stock market.

If you look at specific stocks, there were many stocks that went up a lot because there was a foreigner buying, and things like that, right? So, a little money makes a big impact, and that's why I think Brazil will continue to do well. It's not just this month and so on.

There will be, right? Obviously, it doesn't go up in a straight line and so on. But it's this call that I call "what else.

" And believe me, folks, you know we have foreign clients here; more than half of Encore's AUM is foreign. This should increase over time. Because I've been talking a lot with foreigners, and I test this thesis with them, and I've been hearing a lot of this from them as well, okay?

Well, to finish up on the United States, it's already been 17 minutes on the United States here, right? There's an earnings season over there, right? And it's always important to watch earnings seasons.

And in fact, so far, earnings are coming in a bit better than expected, even though this here is what was expected versus what it was. But you'll notice this always happens; it's normal. Including, when there's a drop, it falls less, right?

That's normal. What I think is more important than looking at this is to look at this other graph that I've shown other times, which is from Goldman; they do it in conjunction with FactSet, right? They do something very cool, which is to take the companies that reported better than expected and see how they reacted the next day, and take those that reported worse than expected and see how they reacted the next day, right?

And again, I've already shown this in the previous quarter, when a company reports better than expected, it rises less than the average. And when it reports worse than expected, it falls much more than the average, right? What does this mean?

It means a crowded market, a market that is over-allocated, right? A market that no longer has a marginal buyer. "Hey, a better-than-expected result came out!

" Who buys? Man, everyone already owns the stock. There are few people left to come buy more and make it go up.

"Oh, but the stock reacted worse than expected. " "Oops, sell! " A lot of people, right?

To sell, it falls more than expected. So, that's kind of what this graph means. And again, it's happening.

And the fact, folks, is that the United States is still expensive, right? This here, I brought it up—there are a million ways to show this to you, but since it was in my report, I was looking there, I brought it for you because it's easy, right? The Nasdaq.

. . what is this line, right?

Here, these two ends of the candle here, are the 95th percentile and the 5th percentile of the multiple. Here it's 75th and 25th. And here is the median of the last 20 years; it's the gray line.

And the little dot is where we are now, right? So if you look at the S&P 500, we're almost near the 95th percentile, at 20 times earnings. The Nasdaq, above the 75th percentile as well, not far, because here too, right?

It's the last 20 years, but even so, the Nasdaq has more multiple elasticity for obvious reasons. So, but all of them are very, very far above the 20-year median, right? Those closer to the median are the smaller caps, which is the Russell, the Equal Weight S&P, meaning, if you treat the MAG7, if you treat the large companies as the same size as everyone else, then the multiple drops considerably, and the mid-caps here a little bit lower.

So, in reality, it's not that the entire United States is expensive, no. It seems the large caps are expensive. We've talked about this a thousand times here, the story of the S&P concentration, which doesn't make much sense, and all of that.

So that's it, it's expensive, right? Anyway, I really think that this this over-allocation there, I don't know if it makes much sense. So, regarding the United States, that's it.

Now let's talk, before talking about Brazil, let's talk a bit about China and commodities, right? Because some things changed, things I said in the last video also changed. Let's start by talking first about China, right?

It's obvious that China started to show— it was showing good numbers, then started showing worse numbers, which is the first evidence that there was front-loading, right? Meaning, anticipation of Chinese exports to the United States, and now that's gone. For example, this here is the PMI, right?

It came out, I don't know, Friday. And this number came out very recently, right? The PMI, just to explain, is a sentiment index where, below 50 is contraction, above 50 is expansion.

And the composite PMI came in at 49 in April, meaning contraction, versus 50. 5 in March. And then there are a lot of breakdowns.

One of them is specific to new orders, "new orders," new export orders. Which was this drop here. It was 49 in March, fell to 44.

7. It plummeted. This 44.

7 is the lowest number since December '22. And if you consider the monthly variation, it's the smallest since COVID. Meaning, exports collapsed there.

Which is a bit like that graph I also showed earlier, at the beginning of the video, of the containers, right? So, I'm sure the Americans are afraid of this whole tariff mess, but we can say that the Chinese are too, right? Everyone already knows what happened, but there was a graph I thought was cool that I wanted to bring to you, which is kind of how they reacted, right?

And it was that ping-pong, right? This here is the following: from bottom to top, February 25, March 25, then the first, second, third round of April tariffs, right? from bottom to top here.

The first ones, China responded in a smaller way, but those were related to fentanyl, things like that, right? And China was calm with those. But after the war really started there on Liberation Day, with that poster board and everything, exactly what the United States imposed, China reacted with the exact same magnitude: 34, 50, then 41.

And here we are. That's why I say we can't yet say if Trump's strategy is working out or not. But with this, what happened?

What was the first thing the market did? It revised down the GDP numbers, right? I brought here above, those from Morgan Stanley, J.

P. Morgan, Citi, Goldman Sachs. All of them changed, all of them decreased, right?

Morgan Stanley was the one that decreased the least, 30 bps, only in 2025, right? from 4. 5 to 4.

2. The others reduced by 50 bps, right? From 4.

6 to 4. 1, 4. 7 to 4.

2, and so on. And Goldman already reduced the '26 one as well, right, to 3. 5, which for China, right?

China growing at 3. 5, seems low, right? That's it.

And, and besides that, there was something curious, right? There was also that graph I already showed of the container drop there. But there was something that was curious: China anticipated the meeting called the Politburo there, which is the Chinese government meeting, right?

And they came with a tone that we considered interesting, a mature tone, acknowledging that there are trade challenges and, anyway, about what's happening in the world, but they didn't come with any major stimulus. What we read as something seeking peace in the tariff wars. Because if they had come with a big stimulus, I would have been more worried that China was going for a fight and would be using money to keep the population there a bit calmer.

And then there were a lot of things they said in the Politburo, much more about accelerating things that had already been announced and not adding new things. But there was a curiosity about what they *didn't* say, right? Because we have to analyze, right, what they didn't say as well, right?

And one thing they didn't talk about was the stability of the Yuan, the Chinese currency, as a target. This might not mean anything, right? But it could also mean that they would be willing to devalue the currency, right?

Which is a response regarding the trade war, to keep Chinese items cheap for export, right? So, let's see. Scenes from the next chapters.

But it's far from obvious. I see many people say, "Ah, the United States is a democracy that has to worry; China doesn't. " I don't think it's that obvious, no.

I think both are worried. Cool. Another thing I wanted to bring to you is about oil, because last month I said, right, that there had just been an announcement of a return partly in the voluntary cuts by OPEC, and right after, this whole Liberation Day story came up, because that changes everything, right?

In the other video, I said I wasn't optimistic about oil; oil should be near 70, and we had 65 at year-end, but now it's worsened, right? And it worsened quite a bit, right? So, let's talk a little bit about that.

To start, there was this story I had already mentioned about the voluntary cut of 2. 2 that had come out shortly before last month's video, and that this wouldn't be the whole amount because it would be offset by countries that are producing above their quota, right? And this was a disappointment since then because it didn't change much.

I'll explain. The three countries—there are more, but like, the three main countries that are producing above quota, which should compensate, one is Russia, which is even more aligned and is complying with the quota, but I don't know if we can trust it. The other is Iraq, which never complied, right?

And the third is Kazakhstan. And here there was news. There's a large production increase there from Chevron, called Tengiz, I don't know what it's called.

and that they won't cut because of OPEC, right? The Kazakh government itself made a statement saying they can't order an oil major to cut production, right? And the worst part is that you can already see it.

There's a satellite system that monitors oil exports, and when you look at. . .

this here is a Morgan Stanley graph from this Vortexa, and you see Kazakhstan's apparent oil exports are way up there; they went way up now. So, I don't think they're caring much about the story of compensating for what they produced above quota. And just today, official data from Kazakhstan came out with production of 1.

77 million barrels per day, which is 300,000 above the quota. Meaning, not only did they not cut, but they produced above it. This is bad for the oil price because of the supply and demand balance.

And with this situation, a crisis kind of unfolded in OPEC, right? Man. And then, a real crisis of confidence, right?

Oh, man. And then there's a risk, which is Saudi Arabia trying to discipline the group, as they've done before in 2014, 2020, I don't know. And the meeting happened now, this Saturday, right?

And in fact, it consolidated a return of 411, to be very specific, 411,000 barrels per day, which is three times more than the initial return plan of that one I mentioned, which was 2. 2 million, minus the excess quotas. Meaning, they accelerated the pace of return.

And then yesterday, Sunday, news started to emerge—which has already been denied—but news started to emerge that Saudi Arabia said, "I'm going to discipline these folks," that they would also make the move of three-to-one over the next four months to bring back the entire voluntary cut if the group didn't respect the quotas. Afterwards, Oil even opened yesterday falling five percent, right? Then they denied this rumor, but the OPEC climate is this: it's tough.

And this makes us very worried here, man. We're a bit worried about the outcome for oil there. This here is a graph that Bel, our commodities analyst here, made, which shows a long-term graph, and she took, like, 5% drops as triggers, and she's seeing what's happening during these times.

And it went from the American recession. . .

there's a. . .

an OPEC crisis there in '97, 2001, then 2008, the great crisis, OPEC's response to the shale revolution, which isn't the case now, right? But there was this here that made prices plummet. Then there was COVID.

Then this positive reaction regarding the Russia-Ukraine crisis. The thing is, looking at these big drops like this, it's scary, right? Because, well, it's not crazy to say oil going to 40, perhaps.

It's not. Which, by the way, 40 is more or less the cash generation break-even point for Prio (formerly PetroRio). Obviously, the lifting cost is much lower than that, but for cash generation, meaning, there's still plenty of cushion; they're still generating a lot of cash even with this oil drop.

But it's not crazy, right? So what we've been trying to do here is to do the math, try to understand how, for example, lower GDP affects oil demand, all that stuff, right? So, for example, until the start of the tariff war there on Liberation Day, the consensus, looking at oil analysts out there, whom we monitor closely, was for roughly a 1 million barrels per day growth in oil demand this year.

That's about 1% of the global size, right? It's a bit more than 100 million barrels/day, but let's stick with 100 million to simplify our calculation. So, growing 1%, which is 1 million barrels/day, we thought this would balance supply and demand.

But now, firstly, after Liberation Day, the consensus was lost; it became dispersed because obviously, uncertainty is much greater, which is my initial point there, from the "what else" call. "what else. " And then, analyzing our own numbers and analyzing numbers from friends on the sell-side, if global GDP falls 1%, which can easily happen, it would be a drop of a little more than 1 million barrels/day, 1.

2 million barrels/day, which would put the world in an excess supply of oil, especially with these production returns. And the market would certainly react very quickly, with oil prices going down. That's the fear, okay?

That's what we're monitoring here. What are the upside risks for the oil price? They are the same ones we always talk about, right?

One is low global inventory, which I even showed the graph for last time; it changed very little. There's another point I never like to talk about here because it's more technical, which is looking at the oil future curves. There's something called the "time spread," right?

which is the difference between different futures. But anyway, the way we see it, which is stable time spreads, shows that this drop so far, which happened in the oil price, is more financial than in the physical market. So, we can't yet say there's an oversupply in the physical market.

Obviously, there are geopolitical risks, right? Which can happen at any moment. And the other thing that's also an upside risk is the continuation of this movement we've been seeing—I talk about it here almost every month— of the sanctions, right?

The U. S. sanctions regarding Iranian oil, which, right, are happening and will continue.

Cool. So, regarding oil, that's it. It worsened quite a bit.

We'll see. It has also fallen a lot, right? So, just to put it in perspective.

Guys, I'm going to talk about Brazil. It's curious how in the last few months of the video, I have much more to say about abroad than about here, right? And there's a theory that many people talk about—one of them is that advisor to Trump, Steve Bannon— which is the following: the press, investors, everyone—people can only pay attention to one thing at a time.

And that's why Trump keeps talking about, "Ah, Canada, your 51st state. " Nobody thinks that, not even him. But he keeps doing that to divert attention, right?

You know what the magician does, that thing, "Are you seeing this little ball here? Look, I'm going to take it, look. .

. " The sleight of hand, right? What do you call it?

It's the hand trick that says, "Look over here! " right? That's what the magician does.

Trump does that. And it's curious that even I myself here, I thought, "Let me write about Brazil. " Man, it seems like there's less stuff, right?

Because I'm seeing all this happen over there. But there is, there were things, yes. The main one, which draws a lot of attention, is the movement of interest rates in Brazil this month.

This is it here. This curve in dark blue here, shows how interest rates were exactly when I recorded the last video, on April 1st, a month ago. What is this here?

Just explaining, right? Here you have one day, three months, seven months, and so on. From today until, for example, five years from now, right?

The interest rate today for five years from now, you get it from the BMF future curve, was 14. 70 last month. Today, it's 13.

80. Much lower, right? The entire curve—the short end of the curve here even increased a bit— but actually, it didn't increase; it's because a month has passed, right?

And it plummets, plummets afterwards, right? This all happened in one month. It fell, like, 100 bps, right?

One percentage point here in the belly of the curve, and on the slightly longer end, more than 75 bps, more than 0. 75%. This is a lot, okay, folks?

And why did this happen here? We can even mention a few reasons here. For example, the Focus survey, right?

The IPCA, the expectation for the IPCA by the entities that report there in the Focus survey, every Monday at the Central Bank, which I think is a bit like looking in the rearview mirror. Anyway, last month was the first drop in the inflation expectation for this year from the Focus survey, right? Good news, and so on.

Besides that, there was—this is worth mentioning— there was a meeting this month. There's always this meeting there in Washington of the IMF. Everyone goes there, there are big debates and so on.

And the team from the Brazilian Central Bank, the Central Bank directors, were dovish there; they were lenient with lower interest rates, right? I always have difficulty explaining what "dovish" is, or "hawkish. " If someone can help me in the comments.

But the guys were dovish. Meaning, indicating lower interest rates. And, by the way, another piece of feedback from that IMF meeting there is that everyone was asking about Brazil, okay, folks?

So, this "what else" call of mine is really happening. But actually, I talked about the Focus survey, I talked about. .

. Actually, I think the main reason this interest rate collapsed so much is foreigners investing. Foreigners who think this interest rate is good went there and invested, right?

Just like they bought stocks. Simple as that, right? But what does it mean?

Another way to look at it, which is cool to show, is what this means regarding Copom meetings, right? Because when the curve falls, it means fewer hikes in Copom meetings, right? So today, what we have, right?

The terminal Selic rate is at 14. 80. Meaning, it implies one hike of 50, here it's 44, a hike of 50, and a little bit left over for the next one, which remains a risk to reach around 14.

75 or a little more than that. Meaning, that's it. The market thinks it's one more meeting one more hike, and our cycle of interest rate hikes is over.

And right after, the cuts begin, right? still there for more towards closer to the end of the year. And remembering that, I don't know what the net of this would be, but remembering that every year, since the end of the FHC era, when Brazil cut interest rates, the stock market rose for the year, right?

So that's it. It's over; we're getting close to the end of our rate hike cycle. This is excellent news.

To finish up on Brazil, I still think that this whole rally that happened has nothing to do with politics, okay? It has nothing to do with the president's drop in popularity, none of that. Just look, it wasn't just us that went up, okay?

Talking to people who serve foreign allocators, the demand for Brazil increased. But it's not just Brazil; demand for Europe grew a lot, so much so that the market there is doing well. And it wasn't just the stock market; there are people talking about Asia and so on.

It's the "what else" call. I think that, yes, made the stock market rise here. It wasn't a drop in the president's popularity, it wasn't a greater chance of Tarcísio; there's nothing of that in the price.

It's good news, meaning there would still be room. And for us here, it's clear that the government has a problem on its hands, right? Which is the excessive risk of losing support with popularity falling, anyway.

I don't remember when it happened; maybe it did. Someone help me out here. I don't remember when I last saw a politician turn down a ministerial post via a public letter.

I had never, I don't remember ever seeing that. And now this INSS scandal has broken out, which doesn't seem light enough not to cause some damage. Anyway, but I don't think this is priced in yet.

Let's just stay alert to the consequences of this. Well, that's it. So we remain optimistic here.

Talking a bit about portfolio changes, because there were many, right? One of the reasons we did very well this month was that we had been switching more defensive positions for some that had lagged behind, retail, things with a bit more beta. During this month, we increased this movement because it worked out, because it fell, right?

There was a time in the month it was falling there. We bought, for example, XP. We bought Nubank on that day, the 9th—I don't remember the exact price— but because it fell a lot there, because Nubank trades abroad, right?

We bought Banco Inter. Besides that, not much due to this effect, but for another reason, we bought Alos. What did we zero out?

Marcopolo. And we zeroed out Direcional, which is a position I really like. I think it's sensational; I hope there's a chance for me to get back in.

And we reduced several positions. We reduced Cyrela, reduced Sabesp, reduced Iguatemi, reduced BTG. But we remain shareholders in all of these.

Oops, something went wrong, huh? No, I hope there wasn't. .

. The video froze a bit there. I hope if there's anything, I'll change it here.

But we continue to be shareholders in all four of these. So that's it, folks. Even opening up 11 percentage points on the index for the month, we still believe our portfolio is far behind.

It's balanced, it's good. We still have some commodities that hindered us last month, and the game goes on, right? Last month, for those who remember, we mentioned that we placed a hedge on the Ibovespa.

But this hedge ended up costing us nothing because we traded well. We did some delta hedges during the drop, traded the index to defend the option, and these delta hedges made money for the fund equivalent to the premium we spent on the protection. Meaning, we were protected, and it cost us nothing.

It was good. But literally today, we started putting on some other defenses, okay? A little here in Brazil, but a bit more on the S&P abroad as well.

But then again, it's a hedge, right? Always looking for what we think is a cheap hedge, probable, right? Because the mindset remains exactly the same: optimism, very cheap stock market, this big paradigm shift which is the "what else" school of thought.

And that's it. As agreed, I'll put the link to the Ray Dalio video below. And folks, thank you very much for your trust, and see you next month.