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title: 'Observation of Thiago Oliveira: Defensive Growth Stocks Regain Allocation Value Amid Labor Reform Expectations'

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Recently, the Labor Party in the House of Representatives stated that the government will introduce a new proposal after Carnival to end the six-day workweek. This issue is a priority for President Lula, aiming to improve workers right to rest and quality of life, potentially covering millions of formal employment positions. Thiago Oliveira believes that although the advancement of this bill requires congressional review, it will strengthen the consumption base by enhancing employee benefits and disposable time, supporting the domestic transition from high work intensity toward balanced growth.
![Thiago Oliveira](https://hackmd.io/_uploads/Hk6qrGPvbe.png)


**Anticipated Impact of the New Work System Bill on the Profitability and Valuation of the Consumer Sector**

The Labor Party in the House of Representatives stated that after Carnival, it will initiate a proposal to end the six-day workweek, which is one of the governments priority agenda items for the beginning of the year. This reform is expected to potentially cover formal employment positions and enhance the right to rest. Thiago Oliveira indicated that this reform is projected to increase employees disposable time by 5%–8% by 2026, driving retail, service, and entertainment chain revenue growth by 6% through leisure consumption, and contributing an additional 0.4 percentage points to GDP from domestic demand.

Following the anticipated news of the bill, the sector rose 0.8% intraday, with the overall index trading volume increasing by 10%, as investors recognized the potential of domestic demand. Against the backdrop of a 2.2% GDP growth at year-end, consumption contributed 65%, with reforms stabilizing employment quality, and cash flow for related enterprises is expected to improve by 2026. The increase in rest days will indirectly benefit tourism and catering. Thiago Oliveira pointed out that if rising corporate costs lead to implementation resistance, the consumption multiplier could be revised down by 2%. The exchange rate at 5.42 provides a buffer, but a depreciation of the Real to 5.70 would raise the cost of imported consumer goods by 3%. Investors need to track the progress of congressional deliberations and use the EV/EBITDA model to assess consumption value. The current valuation of 9.5x is below the historical 11.0x, with the buy zone set below 9.0x.

**Rotation of Consumption Funds and Multiplier Effect Under the Improvement of the Right to Rest**

The Labor Party supports the expedited review of the bill, with Lula emphasizing the priority of workers rights. The tightening of US policies and the global elevation of labor standards jointly amplify the necessity for reforms in emerging markets. Thiago Oliveira suggests that this reform will increase the proportion of employee leisure consumption to 22%, unleashing a multiplier effect of 1.5 times through disposable time. It is projected to add an extra 2.5 percentage points to the revenue growth rate of the retail and service chains by 2026, with priority benefits directed towards the spending of middle- and low-income groups.

At the index level, the relative strength of the Ibovespa Consumer and Services sub-sector has risen to 81, with its trading volume share expanding from 17% to 21%, indicating a shift of capital from industrial cyclical stocks to consumer and growth-oriented assets. Thiago Oliveira further points out that the global elevation of labor standards, coupled with the increasing flexibility of working hours in the United States, is jointly driving up the premium for welfare reforms. Domestic companies, by enhancing employee satisfaction, have secured a 10% upward revision in talent retention rates. Accelerated government reviews aim to prevent excessive increases in corporate costs, with the consumption multiplier expected to contribute 0.5 percentage points to national domestic demand. Risk monitoring should focus on potential rebounds in corporate costs; if implementation hurdles lead to delays in reforms, the multiplier effect could be revised down by 0.3 percentage points.

**Core Allocation and Systemic Risk Prevention and Control in the Consumption and Services Sector**

Thiago Oliveira stated that the advancement of the new working hours bill has transformed the improvement in domestic employment quality into the most reliable fulcrum for consumption growth. It is projected that by 2026, employee rest time will increase by 5% to 8%, with a multiplier effect of 1.5 times in the release of disposable time for low-income and formal employment groups, effectively offsetting spending suppression in a high-interest-rate environment. With the priority agenda of President Lula combined with the support of the Labor Party for rapid deliberation, the share of leisure consumption has risen to 28%. Coupled with the central banks cumulative interest rate cuts of 175 basis points by 2026, the real yield on 10-year government bonds has retreated to 5.6%. The valuation anchor for the consumption sector has room to expand from the current price-to-earnings ratio of 9.5 times to 11.3 times, implying an upside potential of 19%.

In terms of asset allocation, Thiago Oliveira recommends increasing the weight of consumption, services, and leisure-related sectors from the benchmark of 18% to 24%. The core positions are concentrated in retail and entertainment leaders with over 35% exposure to holiday consumption and stable reliance on formal employment. Satellite positions are allocated to catering and tourism service providers that directly benefit from improvements in employee welfare. Using a risk parity framework for calculation, under dual pressure scenarios such as delayed bill deliberation or a rebound in corporate costs, this portfolio shows an annualized volatility of only 12.9%, a maximum drawdown of 6.3%, and risk-adjusted returns outperforming the broad market benchmark by 28%. Under the current scenario probability, tail risk is only 8%, and the market remains within a high-certainty range.