- Equity Research Analyst
Switzerland, Intermediary
ChangeThe views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
Our emerging markets (EM) equity team recently conducted a detailed country-specific review of Brazil that yielded some interesting and potentially actionable investment insights.
My bottom-line conclusion is a bullish one: I think Brazil’s market may offer an attractive path to potentially benefit from some of the country’s macroeconomic trends — particularly disinflation — in the period ahead. I believe now is an opportune time for EM equity investors to consider implementing or augmenting portfolio allocations to Brazilian equities.
The case for Brazil equity: Disinflation, interest rates, valuation
Brazil weathered a strong and early inflationary cycle (relative to the rest of the world) that started in early 2020. The country has since experienced rapidly declining inflation, even as many other nations globally continue to grapple with reining in their persistently high rates of inflation (Figure 1). Falling inflation in Brazil may encourage downward pressure on interest rates, providing a catalyst for rising consumer spending and investment, all of which could be tailwinds for its equity market performance going forward.
Figure 1
On the interest-rate front, Figure 2 shows that Brazil’s real (inflation-adjusted) rate has room to come down, as it remains sharply elevated versus key EM and developed market counterparts. This stubbornly high real rate illustrates that Brazilian monetary policy has been meaningfully tighter than that of most other countries in recent years, the effects of which are now becoming apparent as inflation cools. Brazil has historically tended to run high positive real rates but typically closer to 4% (as compared to today’s 8%-plus level), so normalization of that number and continued disinflation should combine to bring interest rates down.
Figure 2
Looking ahead, I expect the Central Bank of Brazil to eventually undertake a concerted rate-cutting campaign that could provide a material boost to many Brazilian equities. This has often been the case in the past, although direct comparisons with previous cycles are difficult. Brazil’s high rates have precipitated a pronounced shift in investor inflows from equity to debt assets. As a result, Brazilian equities now appear quite cheap versus their own history and relative to the broader EM equity category (Figure 3). Once interest rates start dropping, investor capital may flow back into equities.
Figure 3
Risks to my outlook: Politics loom large
Along with the usual warnings and caveats that should accompany any call to invest in EM equities (greater market volatility, global currency issues, etc.), the main risk here is probably Brazil’s fraught, uncertain political landscape. Market sentiment and inflation expectations can turn quickly based on policy decisions, especially the Brazilian government’s ability to appropriately manage its finances. However, for discerning longer-term EM equity allocators, I believe Brazil offers a distinct investment opportunity at the present time.
Expert
Related insights
Showing
of
Insights Posts
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Beyond US large cap: Where now for equity investors?
Continue reading
event
9
min
Article
2025-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
As India goes to the polls, is the case for Indian equities still compelling?
Continue reading
event
6
min
Article
2025-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
No bulls in the China shop?
Continue readingMultiple authors
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Will a “Goldilocks” economy be just right for equity markets?
Continue reading
event
Article
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
highlight_off
You've been subscribed
Thank you for subscribing. You can manage your subscription using the links provided in any of our subscription emails.
Read next
Showing
of
Insights Posts
Outlook
Equity
Volatility
Growth
Cash-driven investing
Asian Opportunities
Emerging Market Development
China Focus Equity
Asia Technology
Global Innovation
Global Stewards
EM equity
Mid-cap
Small cap
Large cap
Thematic solutions
Market commentary
Tactical allocation
Active management
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Equity Market Outlook
In our Equity Market Outlook, we offer a range of fundamental, factor, and sector insights.
Multiple authors
event
Article
2025-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Beyond US large cap: Where now for equity investors?
How should investors navigate a narrow market? Looking ahead to the rest of the year, Macro Strategist Nicolas Wylenzek examines the structural backdrop and Equity Strategist Andrew Heiskell shares his view on equity opportunities to watch.
event
9
min
Article
2025-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Elections
Asset allocation
Growth
India
Equity
EM equity
Wellington on Washington and the World
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
As India goes to the polls, is the case for Indian equities still compelling?
While current Prime Minister Narendra Modi is expected to secure a third term, a full-scale win is not a foregone conclusion. Against this backdrop and continued investor enthusiasm for Indian equities, Equity Portfolio Manager Niraj Bhagwat and Investment Director Philip Brooks assess the macro case for India. Are higher valuations justified?
event
6
min
Article
2025-06-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
No bulls in the China shop?
John Mullins, Irmak Surenkok and Steven Ye assess the investment debate surrounding China's prolonged underperformance and outline three investment ideas for active investors to consider.
Multiple authors
event
Article
2025-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Outlook
Fundamental equity
EM equity
Large cap
Small cap
Equity
USA
APAC
China
United Kingdom
Emerging markets
Growth
Asset allocation
Volatility
Interest rates
Economic cycle
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Will a “Goldilocks” economy be just right for equity markets?
We provide an outlook on the ongoing shift to new investment regime, and the market segments that we expect will most heavily influence global equity performance in the coming year.
event
Article
2024-12-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Beyond China: what does the rest of the EM equity world have to offer?
For investors contemplating a separate allocation to EM ex-China equities, members of our iStrat Team share their research on the composition of the opportunity set, the growing divergence in the behavior of EM ex-China equities and Chinese equities, and the long-term market outlook.
event
Article
2025-11-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Reasons for optimism about Indian equities
Our experts explain why, despite criticisms that Indian equities trade at higher valuations today than they have historically, they may have the potential to help drive total returns over time.
event
Quick Take
2024-08-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Active management
Macro and market
Fundamental equity
EM equity
Equity
Emerging markets
Top of Mind
Article
Strategic allocation
Multi-Asset solutions
Alternatives
iStrat
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
EM equities: Can they prove the doubters wrong?
Multi-Asset Strategist Adam Berger offers six reasons that EM equity performance could be much more compelling in the decade ahead, from attractive valuations to economic tailwinds to mean reversion in the US dollar.
event
Article
2024-05-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
India equity's improving risk/return tradeoff
This is not your grandfather's India equity market. Equity Portfolio Manager Niraj Bhagwat and Investment Director Philip Brooks explain why and back their argument with risk/return data.
event
Quick Take
2024-04-30
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Health care
Emerging markets
China
Global Industry Research
EM equity
Equity
Asia
Geopolitical
COVID
Quick Take
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Emerging markets health care: Ready for takeoff?
Global Industry Analyst Sue Su shares her sanguine outlook on the health care sector in emerging markets, especially in China, which represents the largest opportunity in this space.
By
event
Quick Take
2024-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Unique Perspectives
EM equity
Portfolio construction
iStrat
Emerging markets
Active management
Thematic exposure
Asset allocation
Brand
Article
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
The allocator’s perspective: three key decisions on EM equities
How can investors best access opportunities within an improving outlook for emerging market equities? Natasha Brook-Walters, co-head of iStrat, shares three key decision points for allocators.
event
Article
2024-03-31
Archived
info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
URL References
Related Insights
legal Information
follow us
Contact Us
© Copyright 2024 Wellington Management Europe GmbH. All rights reserved. WELLINGTON MANAGEMENT FUNDS ® is a registered service mark of Wellington Group Holdings LLP.
Wellington Management Switzerland GmbH. Registered at the commercial register of the canton of Zurich with number CH-020.4.050.857-7
For professional investors and intermediaries only. This content is not suitable for a retail audience.
In Switzerland, the Fund offering documents can be obtained from the local Representative and Paying Agent, BNP Paribas Securities Services, Selnaustrasse 16, 8002 Zurich, Switzerland. The Prospectuses are available in English, French and Swiss French.
we’d love your feedback!
Help us improve our website. For every short survey taken, we give 2 to the Wellington Management UK Foundation to support educational charities helping economically disadvantaged children in EMEA.
Equity Market Outlook
Continue readingMultiple authors