Fynsa
With the first half of the year over, it is inevitable not to look ahead to the remainder of 2022. In all political and economic analyses, the word that probably comes up most often is "uncertainty". "uncertainty.
The world's economies, convalescing from the pandemic, are feeling the effects of a war in Eastern Europe. war in Eastern Europe that it is uncertain when it will end. The Chilean economy is not immune to what is happening in the world and, as if that were not enough, it has its own problems. and, as if that were not enough, it has its own problems.
The controversial proposal of the Constitutional The controversial proposal of the Constitutional Convention, the tax reform and the announced pension reform, and the low popularity of a government that does not have parliamentary majorities contribute to a scenario where certainties do not abound.
In this context, it is likely that the focus in the second half of the year should be on at least two variables: inflation and interest rates. At Fynsa we are interested in determining whether this could lead to a global recession and, consequently, its impact on companies' results.
Since 2008 we have been accustomed to living with abundant liquidity, low inflation and low interest rates. Everything indicates that the scenario has changed and that we will have to adapt to this new reality. If inflation is not brought under control, the Federal Reserve Board (FED) could be more aggressive in raising interest rates, with the expected drag on economies. with the expected slowdown for the economies.
The market is wondering whether inflation has already reached its peak or if, on the contrary, there is still room for prices to continue increasing and we will have to get used to higher inflation for a longer period of time. A difficult question that, these days, few dare to answer. Although in the last few weeks the price of copper and oil have fallen by more than 20%, China has implemented a gradual policy to deal with the pandemic, and long-term inflation inflation is below 3%, this does not seem to be enough to reassure central banks and the FED. As long as they do not have incontrovertible figures that show that inflation has begun to ease, they will not relax their measures. Central banks in our region have not lagged behind in adopting similar measures since last year.
The goal set by the EDF is not indifferent at this point. FED. In my opinion, 2% appears to be a distant target, while up to 3% seems a reasonable rate. Last weekend's signals from Fed Governor Christopher Waller not to accelerate the pace of interest rate hikes, plus some signs of stimulus support for China, were read with optimism by the markets.
Some problems in the logistics and supply chain resulting from the pandemic and the geopolitical uncertainty affecting markets cannot be excluded from this analysis. There are indications of a release in the supply chain, warnings regarding inventory accumulation and a probable drop in the prices of some products. Geopolitical risk is present. The unexpected extension of the Russian-Ukrainian conflict with its impact on energy security, the entry of Sweden and Finland into NATO and China's temptation to annex Taiwan are some of the issues that, without any ability to influence them, we will have to watch closely in the coming months.
We continue to monitor the Chinese government's counter-cyclical economic policy, which is key to avoiding a global recession. Unfortunately, the figures seem to indicate that the world's second largest economy is slowing down (0.4% growth between April and June), threatening the global slowdown. global slowdown.
At this point, if there is one thing that is clear, it is that we are facing a paradigm shift, in which the time seems to have come for Main Street versus Wall Street, and the truth is that this challenging scenario has put our clients' true risk tolerance to the test.
