Every year brings new opportunities. One of my recommendations for 2024 is PagSeguro Digital (PAGS), a Brazilian fintech company that trades on US markets. It has a one-stop app for everything you need money for. That includes deposits, purchases, and lending, explains Eoin Treacy, editor of Fuller Treacy Money.
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The Banco Central do Brasil was among the most aggressive in hiking short-term interest rates. It took the short-term rate from a low of 2% in early 2021 to a peak of 13.75% by August 2022. Then it held the rate steady for a year.
The central bank later waited to cut rates until it had clear evidence inflation was falling back to acceptable levels. Since August, it has reduced them by 2% -- and it expects inflation to be at pre-pandemic levels by the end of 2023.
I believe Brazil is a good model for what we can expect from the US Federal Reserve. After a multi-month pause, the Fed is now talking about cutting rates by 0.75% in 2024. Inflation is moderating here, too. In fact, the bond market is rapidly pricing in the potential the Fed will cut rates by more than 0.75%.
In short, central banks all over the world are turning from raising rates to cutting them. That will help to support new consumer demand and risk-taking behavior. That’s a recipe for a recovery in the most interest rate sensitive parts of the market.
Raising rates by 11.75% had a serious knock-on effect for the most interest rate sensitive part of the Brazilian stock market. The fintech sector took a heavier beating than most. The rising cost of credit hit margins hard.
See also: Top Picks 2020: Shopify (SHOP)
PagSeguro collapsed and has only just begun to recover. As rates come down, demand for credit should recover and so will retail transactions.
The shares have been forming a base for over a year. That’s the foundation that supports new uptrends. They’re now on the cusp of breaking higher. In sum, PagSeguro represents a clear growth opportunity at an attractive price. It has ample scope to stage an impressive recovery in 2024.
(Editor's Note: To download the complete MoneyShow 'Top Picks 2024' report, click HERE)
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Just Released: MoneyShow's 'Top Picks 2024' Report
(Editor's Note: To download the complete MoneyShow 'Top Picks 2024' report, click HERE)