Inflation closed the year 2022 at 5.79%, according to the IPCA (Extended Consumer Price Index) released in January. In view of the events of last year, such as the return of economic activity, the war between Russia and Ukraine and the electoral race, the index was not much out of line with expectations.
But, in order to know if your money is really yielding above the index, financial market specialists use the real gain metric, which is done by dividing the investment income by inflation.
When an asset exceeds this index, it means that the money invested has appreciated. If not, it means you haven’t paid enough. For the most part, variable income assets suffered more from instabilities, which justifies the negative yield compared to inflation.
Check below how much savings, stock exchanges, FIIs and other investments yielded compared to inflation last year, according to the TradeMap survey:
CDI
- Profitability in 2022: 12.39%
- Profitability discounted for inflation: 6.24%
Savings
- Profitability in 2022: 7.9%
- Profitability discounted for inflation: 2%
Ibovespa
- Profitability in 2022: 4.69%
- Profitability discounted for inflation: -1.04%
Ifix
- Profitability in 2022: 2.22%
- Profitability discounted for inflation: – 3.37%
Dollar
- Profitability in 2022: – 6.50%
- Profitability discounted for inflation: – 11.61%
Gold
- Profitability in 2022: -8.48%
- Profitability discounted for inflation: -13.49%
Small Caps
- Profitability in 2022: – 15.06%
- Profitability discounted for inflation: -19.70%
BDRs
- Profitability in 2022: – 28.05%
- Profitability discounted for inflation: – 39.99%
Bitcoin
- Profitability in 2022: – 66.43%
- Profitability discounted for inflation: – 68.27%
What we will see in this article:
Why is it important to understand and track inflation?
To understand the importance of monitoring inflation and the market, it is necessary to differentiate between the concepts of nominal and real profitability. Knowing them is essential for you to understand the results you have achieved with your investment strategy. Consider that you invested in a fixed income security, such as an agribusiness letter of credit (LCA), with a fixed return of 10% per year.
If your application was BRL 1,000, your income will be BRL 100 at the end of 365 days — as this modality does not have an Income Tax (IR) charge. This percentage is your nominal profitability. That is, it represents the total that the investment returned.
In turn, real profitability puts this number into perspective in relation to inflation. Thus, if the IPCA for the same period is 15%, for example, the real yield was negative. That is, even obtaining returns, they were not enough to reach or overcome inflation.
Therefore, monitoring the market and expectations for inflation is a fundamental aspect of its strategy. This understanding will allow you to find the investments that may be more suitable for the high inflation scenario and, consequently, have the chance to achieve more interesting returns.
What investments can protect you from inflation?
As you’ve seen, inflation can negatively impact your portfolio’s yields. Therefore, with the scenario of instability that should extend throughout 2022, it is important to know how to protect your assets, isn’t it?
Get to know the main alternatives to have income above inflation!
Treasury IPCA+
One of the most popular bonds to protect against inflation variations is the IPCA+ Treasury. It is issued by the Federal Government and traded on the Treasury Direct platform.
The title is characterized by being hybrid. This means that its profitability combines a fixed rate and a post-fixed rate — which follows the fluctuations of the IPCA. Thus, it guarantees returns above inflation.
However, it is worth noting that the return is only guaranteed upon maturity of the security. Thus, even if it is possible to redeem early, there is no guarantee of profits before maturity. After all, the IPCA Treasury is subject to mark-to-market — which can generate losses for investors.
It is also necessary to keep in mind that there is the incidence of Income Tax on profits. The rates follow the following regressive table, according to the allocation time:
- up to 180 days: 22.5%;
- from 181 to 360 days: 20%;
- from 361 to 720 days: 17.5%;
- over 720 days: 15%.
Private fixed income securities linked to the IPCA
Also in fixed income, it is possible to protect yourself from inflation with private securities linked to the IPCA. Just like the IPCA+ government bond, they have a hybrid return — which guarantees a return above inflation at maturity.
Thus, there are several alternatives that have these characteristics. Among the main ones are some certificates of bank deposits (CDBs), certain debentures and some real estate credit letters (LCIs) and agribusiness letters (LCAs).
For the last two, an aspect that can be positive, as you saw, is the exemption from income tax. With this, it is possible that your profit potential is higher compared to other alternatives.
inflation funds
One more investment that can be advantageous are inflation funds. They are a collective vehicle whose portfolio is predominantly composed of securities linked to the ANBIMA Market Index (IMA-B).
As these funds have the presence of a professional manager, they can be a practical opportunity for investors. After all, the manager will be responsible for making decisions and managing the investments with the best characteristics for the vehicle’s strategy.
What to expect from the economy and the financial market in 2023?
According to an analysis by the Organization for Economic Cooperation and Development (OECD), the Brazilian GDP growth forecast in 2023 will be 1.2%, below the world average of 2.2%. The report explains that economic activity in Brazil accelerated more than expected in the first and second quarters of this year, however, growth lost momentum in the third quarter.
The smaller projected expansion of the Brazilian economy reflects the deterioration of global forecasts, the tighter fiscal policy and the effects of interest rate increases in recent months to contain the feared inflation.
Including, even remaining below the world average, the Brazilian GDP will grow more than the American and the euro zone, in which both have an estimated expansion of 0.5% and the average of 38 OECD countries, projected at 0. 8%. The institution forecasts a slight improvement in the Brazilian GDP in 2024, with an estimated growth of 1.4%, below the world average, which should be 2.7%.
“Lower commodity prices and the economic slowdown in major trading partners will reduce external demand. Stricter credit conditions will limit household consumption, as well as a slowdown in job creation in 2023 in Brazil,” says the study.
As for private investment, it will continue to rise in Brazil due to greater business confidence. The forecast for the new year is that the monetary policy will remain restrictive and the current interest rate should remain at the same level.
And inflation? A subject that did not come out of newspaper reports and macroeconomic reports. Well, the same study also predicts that the index in our country should decrease during the projection period as the effects of higher energy and food prices adjust. According to the OECD, the rate is expected to drop from 8.9% per year in 2022 to 4.2% in 2023, rising to 4.5% in 2024 as the economic recovery increases.
Another important point is that, if the exemption from federal taxes on fuel and the increase in the income program, the Auxílio Brasil, are maintained, it may be difficult for Brazil to reconcile this with budgetary rules. The need for a more restrictive fiscal policy has been widely discussed in order to reduce the deficit and thus contain the public debt in 2023.
Learn more about year-round forecasts here.
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