Opinion – Marcos de Vasconcellos: The bag is supported by two steel cables and 55 hairs

Investor beware! The bridge you confidently walk over is supported by two steel cables and 55 strands of hair.

Yes, the stock market rose almost 10% in the first week of the month, with the first round of elections, but supported by a concentration of business that has not been seen in eight years.

One in four operations carried out on the stock exchange this month involved shares in Vale (VALE3) or Petrobras (PETR3 and PETR4), as a study carried out by TradeMap showed. That hasn’t happened since 2014.

This type of concentration is a danger for those who invest in stocks, as it shows that large international funds entered Brazil with an eye on highly liquid securities, that is: to be sold quickly in order to turn money into the hands of those who speculated.

When interest is spread across a larger group of assets, it means the bet is on improving the economy, or at least some sectors.

In the movement that happened now, the strong jump in prices leaves the impression that we will see consecutive drops until we return to the previous level.

Vale has already done this. On Friday (14), the VALE3 share returned to close to BRL 70, below the BRL 72 it cost on September 30. Petrobras’ PETR4 has risen steadily since the big jump in the elections, but it has left behind a “gap”, a kind of hole in the price chart, which draws attention.

This type of hole is used to identify opportunities in the market. Carlos Bedicks, variable income operator at Wise Investimentos, explains that, traditionally, the “gaps” are closed, that is: prices usually return to the level before the jumps to, from there, follow their trends organically. Not sure, but it’s an indicator.

Supported by these steel cables called Petrobras and Vale, the Ibovespa —the main index on the Stock Exchange— rose more than 3% in the first half of the month, leaving 110 thousand points and ending the fortnight above 113 thousand (after going through a peak of 117 thousand).

The index includes another 89 stocks, considered the most representative of our market. Looking at the monthly variation of each one (you can do this at bit.ly/3Mz3gPZ), we notice that 55 of them rose less than the Ibovespa this month. In fact, 26 are falling.

Having clarity that the recent rise came from a strong flow of foreign investors in highly liquid stocks should serve to reassure those who see quotes falling to levels prior to the first round of elections.

The electoral definition, in the second round, regardless of the elected candidate, is seen in the market as a trigger to unlock a more consistent rise in shares.

Once the vote count is completed, the sectors that tend to benefit from a Lula or Bolsonaro presidency will begin to receive bets from those seeking medium and long-term gains. As you may already know: the market likes predictability.