In Mexico and in the world, the majority of the economically active population is experiencing, like never before, rising prices, and inflation is at levels not seen in decades.
In September, inflation in Mexico was 8.7%, close to a 20-year high, and in the United States it was 8.2%, although it has decreased in recent months, it is still close to the worst level since 1981 (9.1% in June).
This situation has forced the central banks to take their reference rate to unusual levels and 2022 is shaping up to be the year in which both the central bank of the country (Banxico) and that of the United States (the Fed) have record increases in their rates. Ramsé Gutiérrez, co-director of Investments at Franklin Templeton Mexico, expects Banxico to raise its rate to 10.25% from 5.5% at the beginning of the year, this is the biggest jump since the rate has been used as the main monetary policy tool. For its part, the increase of the Fed will be the highest since 1972 “according to the projections of the members of the Fed, rising from a level of 0.25% to 4.62%,” he said.
But although it seems like a scenario to be alarmed, it is time to bite the bullet and take advantage of the opportunities that are opening up in the market, some analysts recommend.
“Inflation is an essential part of the business cycle. Currently, it is affecting the whole world and, although central banks have tried different measures to control it, everything indicates that this will continue until 2023; however, this opens up some investment opportunities,” Catalina Clavé, director of Vifaru Casa de Bolsa, said in a report.
Those opportunities are found in instruments that are indexed to inflation and interest rates, one of them being the famous (or perhaps not so famous) Udis, which are units of value based on inflation; thus, the greater this is, the better an udi is.
In Mexico, there are instruments such as the FT-Real that follow the movement of the udis “in this product we should have a queue of people, because with high inflation and rising rates, real rates are almost 5%, and only professional investors buy it. The UDIs have paid more than nominal fixed income, they have paid you much more in UDIs than in dollars and people do not invest”, comments Hugo Petricioli, General Director of Franklin Templeton Mexico.
TIPS -which are guarantees or funds that are indexed to US inflation- are also positioned as an opportunity. In his participation in the Annual Summit of Indices and ETFs in Mexico, organized by S&P Dow Jones Indices and Grupo BMV, Juan Hernández, General Director for Latin America of Vanguard, indicated that “short-term TIPS, less than five years, are They behave very well in the face of inflation.
In Mexico, this year Blackrock listed the iShares TIPS Bond ETF “which are the real rate ETFs of the United States, they are a bit similar to the Udibonos of Mexico, and with these environments of inflationary surprises and inflations that seem to be persistently higher generate a benefit in your portfolio”, said Christian Constandse, iShares specialist at BlackRock Mexico, during his participation in the Annual Summit of Indices and ETFs in Mexico.
Variable income, that is, shares, can also be an asset to cover inflation, although thought of more in the long term, because “companies can adapt to prices, increase dividends, etc. And within that (variable income), we feel that high-dividend companies are a good option,” commented Hernandez.
Not only can inflation be taken advantage of, but also the rise in central bank rates, here government debt instruments become a great opportunity, since the more interest rates rise, the better yields they will have, with the added bonus of These instruments usually have a very low level of risk.
In Mexico there are ETFs that follow the movement of government bonds, both from Mexico and the United States, among which are: the ETF Vanguard Short-Term Treasury, which replicates the Bloomberg US Treasury 1-3 Year Bond Index and measures the investment return on US Treasury bonds with maturities between 1 and 3 years. And the iShares S&P/VALMER Mexico, which follows the movement of Mexican government bonds between 1 and 5 years.
The options to invest are varied, the most important thing is to analyze them “define a strategy and put part of our capital to work,” says Clavé.
