Brazilian equities are breaking out of their long-term downtrend vs. the U.S. Brazil’s presidential election is powering optimism in the country’s stock market — and capturing the attention of investors wary of having too much exposure to artificial intelligence in the U.S. equities market. The Bovespa index , a benchmark for Brazilian stocks, appears to have broken out from its long-term downtrend versus the S&P 500 .
The Brazilian index has jumped 12.2% this month through Friday, when it ended at a record peak to notch its biggest weekly percentage gain since April 9, 2020, according to Dow Jones Market Data. That’s compared with a roughly 2% gain for the S&P 500. The Brazilian stock market surged on Oct. 5, the day after the country’s first-round of voting for its presidential election resulted in right-wing candidate Flavio Bolsonaro coming out ahead of left-wing incumbent Luiz Inácio Lula da Silva, but with neither winning a majority of the votes.
Whereas elsewhere in emerging markets, the race to build out AI infrastructure has fueled stock-market gains as well as worries about concentration risk, Brazil may provide equity investors a way to diversify internationally. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it. I would like to receive updates and special offers from Dow Jones and affiliates.
I can unsubscribe at any time. Investors anticipate that Bolsonaro will win in the runoff vote in late October and implement fiscal policies to reduce the country’s deficit, which could lead to Brazil’s central bank lowering interest rates and stronger economic growth, according to Jayaraman. Financial stocks, as well as the country’s energy sector, stand to benefit under that scenario — two areas making up a large part of the Brazilian equities market, he said.
Morgan in a report on Monday. Morgan index tracking Brazil’s financial stocks has recently surged around 25% since those first-round results — widely beating the country’s broader equities market as gauged by the iShares MSCI Brazil ETF , the strategists found, as shown in the chart below. The iShares MSCI Brazil ETF has surged almost 17% this month through Monday, with most of the gain coming from a 12.5% jump on Oct. 5 following the first-round election results, according to FactSet data.
That brought the fund’s gain this year to a massive 37% in dollar terms, far outpacing what the S&P 500 has delivered so far. The ETF’s biggest sector exposure is to financials, with a weighting of 38.3% as recently as Friday, according to fund data on BlackRock’s website. Energy was the next-largest sector in the fund, with a 16.7% weight, followed by utilities at 13.3%, materials at about 11.1% and industrials at 8.6%, to round out the top five.
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