SPX betting against fintechs and mining sector in Brazil

RIO DE JANEIRO, BRAZIL – The likelihood that the Federal Reserve (Fed), the U.S. central bank, will raise real interest rates to positive ground in a bid to contain current inflationary pressure is not negligible, the manager said in a letter to shareholders signed by co-founder Rogério Xavier.

“We spent years with a very stimulative monetary policy and loose fiscal policy,” Xavier said. “Asset bubbles were created. Now, with the reversal of those policies, those bubbles will likely burst.”

According to SPX, the markets that should be most affected by the monetary authorities’ move include technology sector stocks, bonds of high-risk companies, currencies of emerging countries with poor fundamentals, and precious metals.

In Brazil, the manager holds short positions in fintechs and the mining sector on the stock exchange, according to the letter, which did not cite specific names. SPX has maintained long positions in transportation and the financial sector against the index, in addition to relative allocations in the consumer sector.

About the presidential race, Xavier said that the PT (Workers’ Party) candidacy – embodied by the figure of ex-president Luiz Inácio Lula da Silva – leads the odds to win the election. Meanwhile, he says, the market seems to be abandoning its “usual optimism” in relation to a reformist liberal name.

“The PT candidacy seems to condemn us to continue with no major advances or reforms.”

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