This week, CFA Society Chile, an organization that brings together professionals in the investment world, held the Midyear Outlook webinar to analyze the outlook for the economy and investments in the first half of the year and the coming months. The seminar was attended by Nathan Pincheira, chief economist of Fynsa, and Humberto Mora, deputy investment manager of Fynsa Corredora de Bolsa.

In the first part of the seminar, Nathan made a diagnosis of the current situation of the Chilean economy and its prospects. What points did he highlight? Firstly, the continuation of the economic slowdown, marked by the volatility of the mining sector and a slowdown in the trade sector, especially in the durable goods sector. This, in a context of low liquidity - which, after its great expansion during the pandemic, is today at lower levels than those observed before the social outbreak, a service sector with a flatter behavior, sustained mainly by the demand of the highest socioeconomic quintile, and a weak employment situation. The outlook for economic activity is flat, Nathan pointed out, with GDP growth for 2023 at the lower end of the projections, while for 2024 a growth of 1.8% can be expected, below the potential growth level of the Chilean economy.

The good news? Lower inflation persistence. Inflation should continue to decline and converge to the 3% target by the end of 2024. Along the same lines, expectations are that the monetary policy rate will begin to fall. How fast? That is the market's big question, but everything indicates that the decline will be, at least initially, not very aggressive, approaching a neutral level only by the end of 2024.

In the second part of the webinar, Humberto reviewed the outlook from an investment point of view. What are the key points, in his view? On the one hand, the good way in which the challenges faced by the markets, such as the banking crisis experienced a few months ago, have been contained. On the other hand, the good performance of traditional sectors, such as consumer discretionary and telecommunications, as well as the technology sector, driven by the explosion of artificial intelligence. Humberto highlighted the good performance of European stocks, the corporate reform being developed in Japan, which may make this market more interesting, and the disappointing performance of China, in addition to the good performance of fixed income thanks to the increase in interest rates.

Going forward, there are two important factors. The first is that recession risks have been diminishing, with a resilient economy. While a recession cannot be ruled out, it is not likely in the short term. Inflation has been easing, it has been lower than expected and, what is very relevant, market expectations are anchored, investors believe the central banks. The labor market, meanwhile, has been rebalancing. The risk indicators? The inverted yield curve, which has historically been a predictor of recession, and high levels of credit tightening, but the data is inconclusive, he said.

In any case, rate cuts by the FED are not expected before 2024. In the future, however, as a fixed income strategy, we should be thinking about adding corporate risk.

In equities, there is interesting corporate resilience, with companies generally successfully weathering cost pressures and showing better-than-projected results. For Humberto, the equity market rally can be sustained, but with more moderate total returns. Still, he recommends a more balanced global exposure and active portfolio management.

Other keys: The dollar, which will weaken moderately for the rest of the year, and the Chilean asset market, where visibility has improved and political and regulatory risks have been receding. In equities, Humberto pointed out, valuations are attractive and it is more likely to reach a target IPSA of 6,500 points.

We invite you to relive the video here.