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The deposit that never took root — October 2012

Episode

The extreme

In September, domestic money had found the banks — the financial sector took in the cash left over from the defensives and the commodities. A single month was enough to undo the choice. Capital left the sector before it could take root, and it left without a fixed destination: part went back to the forgotten commodities, part rebuilt the shelters. It was the structure's largest single reversal of the quarter, and even so no one stepped into the vacant lead. In numbers: the Financials/IBOV ratio plunged from z +0.65 to −0.51 (Δ −1.15), the month's largest displacement, while Commodities/IBOV rose from −1.31 to −0.43. The Perene Risk Index eased from 57.0 to 38.8, still neutral, with the Selic at its floor of 7.25% a year and the dollar at R$2.03.

What happened next

The exit was not the end of the rotation — it was an interval. The money returned to the banks with more conviction than it had before. By January 2013 the Financials/IBOV ratio was already reappearing well above the average (z +0.75, after clocking +1.33 in December), and in March it touched z +2.74, a concentration rarely seen so far from the averages. The single bet on banks, which October seemed to have closed, only grew larger. The resolution came in April 2013, and it was violent: the financial sector fell 4.05 deviations in a single month, from +2.74 to −1.31. When the cycle finally turned toward the cyclicals, in October 2013, the Perene Risk Index leapt to 84.0.

What did not happen

October's retreat did not bury the preference for banks; it merely interrupted it. Anyone who read the 1.15-deviation drop as a definitive reversal got it wrong: the sector would concentrate again to a record extreme before truly collapsing. The Perene Risk Index falling nearly twenty points did not turn into fear either — the domestic regime stayed long on risk (score 65.5). And the commodities, which sketched a return off the bottom, did not take the vacant lead. The month ended without a leader.

The honest verdict

A single month of outflow looks like a verdict, but it is usually a pause. October's reversal read as the end of the banks' rotation; it was an intermission. The flow returned, concentrated to a rare level, and only then came undone — six months down the road. Thirty days rarely end a trend.

Continue reading: The stimulus that didn't excite (Sep 2012) · The single bet on banks · The money re-enters through the banks (Sep 2010) →

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Characters: Structure (intermarket) · Flow (risk appetite) · Mood · Dollar