2023-05-08 11:10:00
The Chilean market is preparing for a rise in the IPSA and an advance of the peso against the dollar. There are those who do not rule out even a rally, even if it is temporary, after the defeat suffered by the government in the elections of constitutional councillors. Although the ruling coalition obtained 17 of the 51 seats, it was heavily defeated by the opposition, which will control 33. The ruling party’s defeat was internalized in the market, but not in the magnitude of the results obtained yesterday.
Although voices from the private sector predict better conditions for investment, the truth is that the electoral result throws up several points that call for caution in very triumphalist analyses:
- Perhaps the most serious is the defeat for the political center. In terms of votes, the Communist Party was the winner in the ruling coalition. Meanwhile, the Republican Party emerged as the largest force among the votes cast.
- The polarization of the vote augurs a more difficult climate for reaching agreements, both in the Constitutional Council and in Congress.
- This scenario risks two long-term problems: the continuation of constitutional uncertainty and the inability to carry out the necessary reforms.
In an interview with DFJose Manuel Silva Jose Manuel Silva, investment director of LarrainVial Asset Management, to analyze some of these points and the expectations of the market. If you prefer, you can listen to part of the interview at our podcast today. While, Claudia Rivas sums up very well the nine keys that marked the choice.
The Chilean peso will also receive a boost from the rise in copper and the global weakness of the dollar. The US currency is also falling partly as a result of political polarization, this time in the US. One day after meeting cited by the White House, Democrats and Republicans seem to be further and further away from reaching an agreement to raise the debt ceiling and avoid a default in the US economy. Treasury Secretary Janet Yellen warned that if Congress fails to reach an agreement, The US will face a “financial catastrophe”.
The discussion about the debt ceiling and an eventual default aggravates the recession scenario that is already projected for the US. Investor Warren Buffett warned that “the incredible period” that the US economy has lived through “is coming to an end.” Interest rate futures (CME gauge) show a 33% chance of a rate cut at the July meetingand the chances rise to 50.4% for the meeting in September.
Key in the market calculations will be the results of the survey to be released by the Fed this afternoon. The opinion survey of bank credit managers will provide data on the tightening of credit conditions applied by banks of different sizes. The idea has settled in the market that the credit crunch after the collapse of Silicon Valley Bank and First Republic Bank will help the Fed cut rates this year.
Pay attention today:
- The INE publishes the CPI for April. Analysts expect a slowdown, with a monthly rise of between 0.4%-0.7% from the advance of 1.1% in March. (08.00 hours)
- We will also have figures for Chile’s trade balance for April. (08.30 hours)
- In the US, Wall Street will pay attention to the index of consumer inflation expectations. (11:00 a.m.)
- The Fed publishes a survey of credit chiefs of US banks. (2:00 p.m.)
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