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The floor that rearranged its furniture — April 2022

Episode

The extreme

There is a kind of movement that never shows up in the mood of those watching. The Brazilian market spent all of April rearranging the furniture from the inside — pulling money out of the sectors tied to the cycle and handing it back to the corners that pay real income — while the investor, for his part, never left the armchair. In numbers: the edge of real estate funds over the Ibovespa jumped from a z of −1.12 to +0.94, the largest move of the month; commodities in reais rose from 0.07 to 1.64; utilities reached +2.51. And Ânima, the gauge of domestic mood, opened and closed pinned at 51.7, barely inside neutral.

What happened next

The motionless furniture was deceiving. Two months later, in June, the mood that would not stir collapsed to the bottom of the series — the domestic risk axis sank to 8.4, the deepest gloom in the reading. In July 2022 it recovered to 47.1, and in October 2022 it shot up to 88.4, appetite at the top of the scale. April's empty armchair was hiding a coiled spring. And the very shelter that had been chosen turned over again: commodities in reais, the harbor April piled at the top, lost their premium in July (from 2.21 to 0.71), and the defensive lead changed hands. Only in April 2023 would the structure move ahead of sentiment again — this time to readmit risk, with Ânima stuck at 20.6.

What did not happen

What did not happen was the calm that the 51.7 seemed to promise. A still mood is not a stable mood: it was the pause before violent swings, not the serenity of a settled market. Nor was the shelter of the moment confirmed — commodities in reais, April's harbor, were precisely what gave way most in the months ahead. And the mismatch between what is felt and what is allocated did not resolve by mood gently catching up to structure; it resolved in jolts.

The honest verdict

April's reading got the form right — a rotation of relative prices with no echo in sentiment — and was honest in calling it a mismatch. What it could not know was that the quiet of the mood was the loudest symptom of the month. A motionless indicator is not an indicator at peace; sometimes it is just one that has not yet decided which way to jump.

Continue reading: The commodities shock (March 2022) · The house in the dark (2022) · The global tightening of June 2022 →

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Characters: Structure (intermarket)