The war between Ukraine and Russia leaves us with a big question mark, as many raw materials from these regions may be dwindling in supply. However, it is striking that the flow of traffic in the Black Sea was only reduced by 6% after the war. Obviously, someone buys what Russia produces, economic sanctions have been declared, but they are not carried out and this generates a great contribution to the general confusion. This would give the impression that many commodities have rising prices that cannot be sustained in the medium to long term.
The covid in China has forced the quarantine of nearly 400 million people, this will generate a significant slowdown in the global economy. When the world was growing and commodity prices were rising rapidly, China was growing at a rate of over 6% per year, a 4.4% increase was expected for this year, after covid, it may grow at a slower rate.
This poverty effect in the Chinese economy could lead to lower commodity prices. On the other hand, the devaluation of the yuan and the strengthening of the dollar, they increase the price of raw materials, which makes it more probable that the price of cereals will fall.
Rising rate in the United States pushes the price of the dollar higher internationally. A dollar bolstered by greater interest rate demand is an enemy of commodity prices. America becomes a sucker of funds.
Everything suggests that the short-term rate would rise to levels of 3.0% per year, while the rate of return on US 30-year Treasury bills would be between 3.5% and 4.0% per year. . The Chairman of the Federal Reserve has announced that all necessary measures will be taken to reduce the high levels of inflation.
The government faces a very difficult scenario, Argentine Commodities are likely to start significant profit taking, this will not only affect tax revenue, but also Argentine Central Bank currencies.
In Brazil, short-term rates have risen to 12.75% per year and the real is below 5.0 reais per dollar, indicating that it is receiving capital from abroad, which should also happen in Argentina since the alternative dollars are located very close to the price of solidarity dollar which is trading at $203, while the alternative dollars They are trading around $210.
the dollar value it 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 Britain at 9.0% per year and in the United States at 8.3% per year, however, interest rates in Europe n not reach 1% per year, whereas in the United States, invested in 3 years, you manage to invest the money at a rate of 2.9% per year. With rates being negative relative to inflation, we believe prices could continue to rise globally, which sooner or later will also impact Argentina.
the dollar wholesaler for the month of May, it would drop from around 4.1% to 4.3%, so it would leave a very high inflation floor for the month, the inflation outlook for May would be at a floor of 5%. At this rate of inflation, by the end of the year, we would end up with a price increase of about 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 the year next.
Companies should work to increase the market uptake of their products, expanding the product line, mainly at lower prices than the current ones, given that we do not see a real wage growth scenario.
You need to take advantage of current financing rates as they are always lower than the inflation rate, lower than the projected devaluation rate and you need to do an inflation assessment of your own business, sales prospects, number of days before the receipt of the goods sold and terms of payment to suppliers.
what to invest in
We continue to recommend fixed inflation-adjusted duration and buying global dollar bondsparticularly those maturing 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.
the stocks and cryptocurrencies they are not the same, but both assets are today considered very risky, given the likely rise in the short-term rate around the world and the strengthening of the dollar.
We continue recommending the purchase of property 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 increase in property assets.
In short, financial assets are experiencing high stress that they will find difficult to overcome in the short term. You have to buy with the idea of collecting dollar bonds to obtain good returns a year in advance.
The properties are a very good deal, which will materialize in the medium term, since the current prices are far from those observed during the years 2017/18. For those who have liquidity in pesos, the inflation-adjusted fixed term is a very good alternative.