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The month the market chose income over cycle

Episode

The extreme

The house was the same — double-digit interest, mood on the floor, a defensive regime — but in June it changed tenants. In mid-month, in a session where nearly the entire relative landscape of the market gave way, only two niches were left standing: utilities and brick-and-mortar real estate funds. What unites them is not sector; it is contract. In numbers: in the June 17 session, paper real estate funds paid an average yield of 12.92%, against 9.38% for bricks — with the Selic, back then, at 14.5% a year.

What happened next

The rest of the month confirmed the change of address. In the June 26 session, utilities were accelerating against the index, with a thirty-day move of +6.3%; at the June 30 close, commodities — which had opened the month in the relative lead — were down 9.2% against the index over thirty days. Financials, cheap and profitable, kept ceding ground, but that is the half of the story the archive tells on another page. And aggregate capital did not flee: the Perene Risk Index crossed June from 41.9 to 81.7, declared risk appetite, while the Ânima Index ended at 23.2 — deep pessimism.

What did not happen

There was no turnaround. The domestic regime ended June where it began — defensive, with a score of 28.7 — and the intermarket kept its stamp of moderate risk aversion. Utilities gained ground coming from below: even while accelerating, they remained far from their own average, narrowing a gap the month did not close. Nor did mood sign the thesis — deep pessimism ran through the whole of June. The market did not start liking defensives; it started paying for what they hold in contracted income. Those are different things.

The honest verdict

June did not elect a winner; it elected a contract. With money paying 14.25% a year, income that does not depend on the cycle needed no optimism to take the lead — arithmetic was enough. The archive records the preference, not its duration. The tenant changed; the house, defensive, remains the same.

Continue reading: When fear learned to yield (Apr 2012) · IFIX vs. IBOV — bricks against paper · Cyclicals vs defensives — the duel that reveals appetite →

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Read also: When fear learned to yield — Apr 2012 · IFIX vs. IBOV: when bricks only rise because paper collapses · Cyclicals vs defensives: the duel that reveals appetite

Characters: Cyclicals × defensives · Rates (Selic)