What to invest in to beat inflation in 2024

2024-01-15 14:25:00

The inflation data for the month of December was published and today more than ever knowing what to invest in is key. We bring you investment alternatives to help you protect your savings from inflation.

The National Institute of Statistics and Censuses (INDEC) disclosed the inflation data for the month of December, reporting that the monthly variation stood at 25.5%, leading the year-on-year at 211.4%.

From aggregate demand to aggregate inflation

This last datareflected a considerable acceleration compared to the figure reported the previous month, which was around 12.8%. Despite this, this month, the categories that showed the greatest increases were those of “Basic goods and services” and “Health” having registered increases of 32.7% and 32.6% respectively. Besides, Core inflation (less volatile prices in the economy) showed a significant acceleration compared to November and stood at 28.3%. It should be noted that this is a level considerably higher than that of previous months.

According to the latest Market Expectations Survey (REM) released by the Central Bank of the Argentine Republic (BCRA), the main consulting firms predict that the price increase is 226.7% for the next 12 months.

The new government’s plan

The official dollar rose to $800 with the objective of recovering external competitiveness and increasing reserves. This measure, whichIt implied a daily increase of 118%, equivalent to a devaluation of 54%, took the real exchange rate to levels close to the exit from convertibility.

The devaluation boosted inflation, which already showed acceleration. Increases in rates and fuels reorganized relative prices, taking advantage of the change of government to generate trust. However, there is a need to monitor the persistence of inflationary inertia in the coming months and its impact on the duration of the confidence shock.

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Issues to monitor

After the December devaluation, the exchange rate became a nominal anchor with a crawling peg 2% monthly. Interest rates were kept around 8% to reduce the purchasing power of the local currency. However, the loss of competitiveness in the face of high inflation raises questions about the sustainability of this policy. There is concern about the possibility that the monetary authority will accelerate the daily devaluation or make a discrete jump, putting stabilization at risk. If the real exchange rate remains at these levels, the competitiveness gained by the devaluation could be lost in two months.

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After the reduction of the monetary policy rate from 133% to 110% TNA, there was a demand in the market for instruments in pesos to reduce the loss of value of savings and reduce the negative spread with fixed-term rates. CER curve experienced significant performance compressions, especially in the shortest section, where rates went from -48% a -80%.

Before the discrete jump in the exchange rate, the CER curve went from positive returns to negative values. The TX24 sovereign bond, for example, returned 25.7% in one month. Future prospects suggest that inflation will remain high, with BCRA forecasts adjusting expectations upward for 2023, reaching 189.2%, indicating two consecutive years with inflation considerably above 100%.

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What should you invest in in 2024?

Given this complex panorama, where Having pesos without investing generates losses of purchasing power of great magnitudeWe consider that Positioning yourself in CER and Dollar linked assets represents the best option to protect value against inflation considering low-risk fixed income assets.

Taking this scenario into account, we highlight the following instruments to invest:

– Short term (CER TX24 Bonus): First of all, thinking about the short term, we suggest investing in TX24 that adjusts its capital by the CER, thus managing to keep up with inflation. Given that in the universe of pesos there are no alternatives to hedge against expected inflation in the future (the market discounts double-digit levels for the month of January as well).

– Medium Term (Dollar Bond Linked T2V4): National T2V4 bond linked to the US dollar, managing to create coverage against devaluation. This bond maturing on April 30, 2024, operates with good volume and to date has a devaluation yield of -13%.

* Head of Research de IOL Invertironline

#invest #beat #inflation

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