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The fist that loosened without opening — February 2016

Episode

The extreme

There was relief in the air, but not confidence. After the worst start to a year the series had ever recorded, the Brazilian market seemed to finally breathe — the number improved by nine points in a single month. And even so, nothing fundamental changed places. Capital loosened its fist; it did not open its hand. It is the distance between ice that cracks at the surface and a lake that stays frozen underneath. In numbers: the intermarket system rose from 13.07 to 22.43, leaving January's floor but staying in heavy risk-off; the Utilities/IBOV ratio, which had hit 3.28 deviations in January — the highest point in the entire series —, eased back to 2.27; the Perene Risk Index went from 49.9 to 63.3, back to neutral, with the dollar at R$ 3.97 and the Selic at 14.25% per year.

What happened next

The thaw carried on for two more months — in April the structure even crossed into neutral terrain. Then May undid it. The intermarket fell back from 54.37 to 32.48, returning to moderate risk-off, and capital changed shelter within the stock market: the IFIX/IBOV ratio jumped from -1.39 to +0.65, more than two deviations in a month. Only in August 2016 did the structure return firmly to neutral (45.8 to 50.14). Full recovery — prices once again tilted toward risk — would wait until the start of 2017, when the Selic finally gave way: February 2017 brought the intermarket at 50.75 and the rate already at 12.25%.

What did not happen

The thaw was no straight line. Anyone who read February's nine points as the beginning of spring would have been mistaken: May gave back much of the advance and the market pulled back. The Selic brought no relief for nearly a year — it stayed pinned at 14.25% until it only began to give way at the end of 2016. And the havens that February emptied were not abandoned for good: in May the Utilities went back to reinforcing the lead.

The honest verdict

The reading got the state right, not the calendar. Telling a number that rises apart from a regime that changes was the win — February moved the needle without moving the phase. But the surface thaw took nearly a year to become spring, and it pulled back before it advanced. January's floor was a floor; the recovery that came after was not a straight line.

Continue reading: The worst start to a year · The floor that was not a floor · 2015 against the floor of 2016 →

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