Brazilian equities: A market in transition

Key takeaways:

• Brazil’s macro landscape is improving: A decade after policy-driven stagnation, Brazil is regaining investor credibility through fiscal reforms, disinflation progress, and more consistent monetary policy
• Domestic demand is driving growth: Despite external headwinds, strong retail sales, rising employment, and a resilient industrial base are supporting Brazil’s economic momentum
• Diversified exports strengthen resilience: Brazil’s external position benefits from a balanced commodity mix – soybeans, iron ore, and crude – and broad trade relationships with China, the US, and Europe, reducing vulnerability to single-market or commodity-specific shocks
• Valuations remain attractive: Brazilian equities trade at a steep discount to global and emerging market peers, while earnings forecasts are strengthening—pointing to potential rerating if reform progress holds

Points of differentiation:

• Data-rich, index-integrated lens: Combines macroeconomic trends with granular insights from the FTSE Brazil Index, linking policy and equity market performance
• Balanced tone, forward-looking narrative: Moves beyond the boom-bust commodity framing to highlight structural shifts and internal growth drivers
• Clear portfolio relevance: Demonstrates Brazil’s low correlation with US and EM benchmarks, positioning it as a differentiated allocation within global equity strategies

What does our research mean for investors?

Our research suggests that Brazil offers a compelling case for selective exposure. Stabilising macro conditions, improving earnings, and low valuations support a potential re-rating, while its low correlation with major global benchmarks makes it a useful portfolio diversifier—especially in a fragmented trade environment. Investors should monitor the durability of reforms and domestic demand as key signals for sustained upside.