Brazil Archives - Global Focus Capital LLC

Last week we wrote about the amazing year to date performance of the Brazilian equity market. Despite all the awful headlines and negative investor sentiment the Brazilian market was up over 20% and last week it went up a further 4%.

A similarly widely disliked equity market fraught with negative headlines having a great start to the year is Russia.

Russian equities were up 2.5% last week and in 2016 they are up about 11%. Not bad for a market that like Brazil comes with lots and lots of baggage.

All resource-oriented equity markets have benefited from the resurgence of commodities and both economies are expected to contract further in 2016, but Russia and Brazil are not cut from the same cloth.

There are at least three key differences that investors should note before lumping these emerging markets together:

Economic Sector Composition
Fundamental Drivers of Return
Value Add of Top-Down versus Bottom-Up Implementation Approaches

Click to read the full report Can This Russian Bear Learn To Samba?

Sincerely,

Eric J. Weigel
Managing Partner of Global Focus Capital LLC

eweigel@gf-cap.com

With all the bad news coming out of Brazil investors must be perplexed by the strength of the Brazilian equity market this year. After a strong jump up last week in both equity prices and the Real, the MSCI Brazil index is up 20% for 2016.

The news last week was not good. It was reported that GDP growth clocked in at -3.8% with little hope for a rebound this year. The Zika virus keeps wreaking havoc on the local population, Olympic Game preparations are over-budget and behind schedule, and lastly Ex-President Lula De Silva was detained in a corruption scandal involving the country’s largest company Petrobras.

Capital markets are unforgiving to those foolhardy enough to believe that short-term predictions can be made with any accuracy and the example of Brazil hammers home the point. Just when you think that certain investments are basket cases with no hope things turn around.

A great example of this happened last week in global capital markets.

Now, I am not all that confident that Brazil is out of the woods yet and in fact our country allocation model rates Brazilian equities toward the bottom of the pack.

The point is that capital markets are always full of surprises.

When do we get the biggest surprises? Usually when the consensus view is at an extreme.

After the walloping that commodities and emerging market investments have been taking in the last few years, it is not too surprising to find investor sentiment heavily skewed against these beaten up sectors.

Click here to download the report: EM & Commodity Resurgence

Sincerely,

Eric J. Weigel
Managing Partner and Founder of Global Focus Capital LLC

eweigel@gf-cap.com

Tag Archives: Brazil

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