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The concern is over a new round of restrictions due to an increase in Covid-19 cases. Photo: Hugo Arce / Public Photos
The last few days have seen a strong wave of volatility in markets around the world. Experts cite that the main culprits would be concerns related to fears of high inflation in the short to medium term, in addition to the weaker outlook for the growth of the world economy as a whole and also the increase in the number of Covid-19 cases resulting from the advance of the delta variant. However, it is clear that the stock markets are acting according to expectations and in the very short term we fear a new wave of restrictions in some countries or the partial or even total reopening, as planned in recent months by the governments of each country. location.
In Europe, specifically, we are seeing the contagion charts accelerate in recent days in countries like the UK, Spain, the Netherlands and France. However, even with this growth, the number of deaths remains practically stable, around a thousand per day. It should be remembered that the worst time in the region was at the end of January. Another point that is attracting attention at the moment is that this acceleration is going through young people and those who have not yet been vaccinated. Recent data shows that in the UK, 60% of hospitalizations for Covid-19 are unvaccinated people. Other examples show that in Catalonia 78% of admissions also concern unvaccinated people and that in the Netherlands only 6% of new cases have been vaccinated.
In this environment, we see the dollar appreciating against emerging market currencies and declining stock markets. In Brazil, the Ibovespa fell by 2% over the month while the real depreciated by more than 5%. In the price wave, oil also fell sharply in July, reaching an 8% drop from the start of the month to July 20. This fact can be explained even by the latest news regarding the late decision by the Organization of the Petroleum Exporting Countries and Its Allies (OPEC +) to ease restrictions on the production of the raw material in the coming years. On Monday (19) the cumulative losses were around 10% compared to recent peaks.
Given this whole scenario, it is obvious that the recovery of the global economy must necessarily go through a stronger vaccination process and that this concern will dissipate over time. Therefore, in the future, we will need to continue to monitor inflation data and the impact on growth in developed and developing countries. Now is the time to properly allocate the investment portfolio.