The IMF has signaled that Brazil will soon emerge from its recession, but that news is undermined by concern over Trump-branded economic policies. The broad stock index known as the Bovespa is down almost 7% since the US election. Should investors lock-in otherwise strong gains and retreat from Brazilian equities? Since much of the upside was a rebound from oversold levels, we are unwilling to dismiss further potential. A more balanced economy in Brazil will lead to positive earnings surprises. Resilience in corporate income has been the result of lower financing costs, rather than a still-expected recovery in sales volumes. And ironically, given Trump rhetoric, a stronger US dollar may be an arms-length benefit, if it leads to improved growth in China. Many Brazilian companies have hefty exposure there. ■
Learn more at the International Monetary Fund.
© 2016 Cranganore Inc. All rights reserved. Image: Macfromlondon at Can Stock Photo Inc.