Have you looked at Brazilian equities lately?

The 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

David Reid

, CFA

Equity Research Analyst

Related insights

Showing of Insights Posts

Equity Market Outlook

Andrew Heiskell

Nicolas Wylenzek

event

Article

2025-12-31

Beyond US large cap: Where now for equity investors?

Andrew Heiskell

Nicolas Wylenzek

event

9 min

Article

2025-06-30

As India goes to the polls, is the case for Indian equities still compelling?

Niraj Bhagwat

Philip Brooks, CFA

event

6 min

Article

2025-06-30

No bulls in the China shop?

Multiple authors

event

Article

2025-03-31

Will a “Goldilocks” economy be just right for equity markets?

Andrew Heiskell

event

Article

2024-12-31

5 LOAD {count} MORE

URL References

Related Insights

Stay up to date with the latest market insights and our point of view.

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?

Niraj Bhagwat

Philip Brooks, CFA

event

6 min

Article

2025-06-30

China Macro and market Equity iStrat EM equity Tactical allocation iStrat program Article

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

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

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.

Andrew Heiskell

event

Article

2024-12-31

Asset allocation Emerging markets Equity iStrat EM equity China Strategic allocation Article

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.

Alex King, CFA

Supriya Menon

event

Article

2025-11-30

India Equity Geopolitical EM equity Asia China Growth Digital transformation Quick Take

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.

Murali Srikantaiah

Brian Yeong

event

Quick Take

2024-08-31

Outlook Equity China Total return Macro and market EM equity

Chinese equities: Pockets of strength for patient stock pickers

Portfolio manager Bo Meunier explores how China’s recovery may be more modest than headline numbers suggest and why, as a stock picker, she remains constructive.

Bo Meunier, CFA

event

2024-06-30

Active management Macro and market Fundamental equity EM equity Equity Emerging markets Top of Mind Article Strategic allocation Multi-Asset solutions Alternatives iStrat

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.

Adam Berger, CFA

event

Article

2024-05-31

India EM equity Volatility Total return Risk management Equity Quick Take

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.

Niraj Bhagwat

Philip Brooks, CFA

event

Quick Take

2024-04-30

Health care Emerging markets China Global Industry Research EM equity Equity Asia Geopolitical COVID Quick Take

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.

Sue Su

event

Quick Take

2024-03-31

11 LOAD {count} MORE

URL References

Related Insights

View our insights

Wellington Alternative Investments

Contact us

Our Funds

Fund Documents

Fund Documents

Asset class

Investment Solutions

Explore our insights

Asset class

Key Topics

Formats

2025 Investment Outlook

Sustainable Investing

Stewardship Principles

Investment Solutions

Corporate Sustainability

About us

Contact Us

Media & press

Careers

Unique Perspectives

Have you looked at Brazilian equities lately?