Investors lose faith in Brazil

Brazil's benchmark Bovespa stockmarket index has fallen by 11% since January to become the world’s worst-performing market.

Big Jesus statue in Rio de Janeiro
The Brazilian economy could shrink next year
(Image credit: © Getty Images)

You would think that soaring energy, mineral and food prices would be good news for a commodity exporter such as Brazil, says Simon Constable in Barron’s. Yet the local stockmarket has been the world’s worst-performing this year. The benchmark Bovespa index has fallen by 11% since 1 January. October marked the fourth losing month in a row for Brazilian stocks, their worst showing since 2014. The real currency has lost 8% against the US dollar so far this year. Economic reform and the commodities boom had tempted in foreign investors, but now “you’ve got a lot of people who are giving up hope”, says Phillip Torres of Aegon Asset Management.

Brazil looks cheap on a cyclically adjusted price/earnings (Cape) ratio of 16.8, according to data from Mebane Faber of Cambria Investment Management. Yet this is no time to go bargain hunting. “A more challenging macro scenario” may see earnings forecasts cut, making currently low valuations deceptive, private banking firm Wealth High Governance tells Bloomberg.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.