Investing Before Selic Rate Cuts Yields Higher Returns, Says XP: Is Now the Time to Buy?
- Why Timing Matters: The 4–12 Month Sweet Spot
- The Hidden Driver: Future Rates, Not Selic
- Are FIIs Still a Bargain in 2025?
- What’s Next for Selic and FIIs?
- FAQs: Your Burning Questions Answered
Timing the market is tricky, but XP Investimentos’ latest analysis suggests that getting ahead of Brazil’s Selic rate cuts could be a game-changer for investors. Their study reveals that buying into real estate funds (FIIs) 4–12 months before the first rate cut historically outperforms waiting until reductions begin—with returns averaging CDI +6% to CDI +8.8% annually. Here’s why the "early bird" strategy works, how future rates drive the market, and whether FIIs still offer value in 2025.
Why Timing Matters: The 4–12 Month Sweet Spot
XP’s research compared three past Selic-cutting cycles and found a clear pattern: Investors who entered FIIsgained significantly more than those who waited. Early movers saw annualized returns of CDI +6% to CDI +8.8%, while latecomers earned just CDI +2.8% to 100% of the CDI. The reason? Future interest rates—not the Selic itself—dictate FII pricing. As markets anticipate Central Bank (Copom) moves, fund prices adjustofficial rate changes. "It’s counterintuitive, but FIIs rally on expectations, not just actions," notes the BTCC team.
The Hidden Driver: Future Rates, Not Selic
XP emphasizes that FII performance hinges on, which reflect market expectations. For example, despite Brazil’s Selic sitting at a 20-year high in 2025, FIIs gained traction as futures priced in 2026 rate cuts. "When the yield curve flattens, FIIs start discounting lower rates ahead," explains the report. This dynamic explains why savvy investors often front-run the Copom—something to ponder while sipping yourthis morning.
Are FIIs Still a Bargain in 2025?
Even after recent gains, XP argues FIIs trade at attractive discounts. The IFIX index’s price-to-net-asset ratio sits at 0.89x—below its historical average—with solid fundamentals backing the sector:
- Logistics vacancies: Just 7.5%, per TradingView data.
- Rent adjustments: Strong contractual inflation-linked hikes.
- Office recovery: Gradual post-pandemic demand rebound.
What’s Next for Selic and FIIs?
XP projects rate cuts will begin in, tapering to 12% by year-end. While September’s softer CPI data sparked optimism, inflation remains above target, keeping rates "higher for longer." This extended runway, says XP, makes 2025 a prime window to position for the next cycle—like snagging afresh from the oven.
FAQs: Your Burning Questions Answered
How do future rates affect FIIs?
FII prices react to shifts in rate expectations embedded in futures contracts, often moving months ahead of actual Selic changes.
Why invest before cuts begin?
Early entrants capture price appreciation as markets discount lower rates, while latecomers miss the steepest gains.
Which FII sectors are strongest now?
Logistics (low vacancies) and residential (rent resilience) lead, but diversify—no one puts all theirin one pot.
