For domestic equities, our base-case scenario calls for a 2021 IPSA target of 5,200 points (+7.0%). The domestic outlook will remain complex due to the political and institutional challenges we face in the coming months, but the external outlook offers some compensation. Valuations remain attractive in a long-term context, both in absolute terms and relative to the rest of Latin America (a 25% discount in terms of price-to-book ratio). 

Earnings forecasts continue to be revised upward. Earnings momentum and expectations are improving, which has led to improved cash flow dynamics.

Whether or not the third withdrawal from pension funds—or other alternatives currently on the table—is ultimately approved, and with lockdowns being extended for longer periods, it is likely that the government will have to make an even greater fiscal effort in any case, thereby further strengthening an already abundant liquidity environment. 

By sector, this year has seen a steady improvement in the most cyclical sectors—those hardest hit by the pandemic—such as consumer discretionary, real estate, and financial services. 

That said, the commodities sector remains our favorite and should continue to outperform, given that the outlook for underlying commodities such as pulp and lumber (CMPC, COPEC), iron (CAP), copper, and lithium (SQM) has continued to strengthen; there is room for multiple expansion; and we prefer to have greater exposure to the external cycle.