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The discharge from the ward that never came — the banks of June 2011

Episode

The extreme

For months Brazilian banks had been the convalescent of the stock market: the sector that returned less than the index and that no one cared to hold. In June, it seemed the patient was finally rising from the bed. Financials took the firmest step of the entire internal structure, while commodities in reais — which had been reigning at the top — began to give back the premium. It was not leadership; it was a battered sector finding its way back toward the center. In numbers: Financials/IBOV from −0.67 to −0.04 (Δ +0.63), the largest move of the month; Commodities (BRL)/IBOV retreating from 1.21 to 0.70. The real firm at R$ 1.587, the Selic still rising, at 12.25% a year, and the domestic regime in assumed risk (65.7).

What happened next

The improvement did not turn into a trend — it turned into a relapse. In September, the market deepened its defensive preference, with cyclicals sinking against non-cyclicals. By December, money was already paying more than two deviations to live in utilities and real estate funds (Utilities/IBOV at 2.24), and the banks were back at the end of the line: Financials/IBOV fell to −1.39. In June 2012, a year after the sketch of rehabilitation, the sector remained depressed, at z −1.72. The patient had sat up in bed. It never came to walk.

What did not happen

The discharge from the ward never became leadership. Anyone who read June's advance as a cure for the financial sector got it wrong: instead of taking the top, the banks fell to a deeper place than they had been before. And there is a confession in the archive. When closing the books on June 2011, months later, the engine itself found only two analogous episodes — below the minimum of five for judgment — and left the verdict open, marking neither a hit nor a miss.

The honest verdict

A strong month at the bottom of the hierarchy is the patient sitting up in bed, not being discharged. The improvement at the margin was mistaken for a change of regime — and not even the house would judge it, because comparable history was missing. In the end, capital did again what it always does when it is suspicious: it preferred the certainty of little to the hope of much.

Continue reading: The money re-enters through the banks · The single bet on banks · The lenders leave the table →

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