Brazil was one of the countries leading the way out of the global recession, and now the country is showing some signs of weakness. One clear sign? All but one Brazil exchange traded fund (ETF) have dropped below their 200-day moving averages.
Seemingly everything from budget cuts to inflationary pressure is hitting the Brazilian economy, and the performance of popular ETFs like iShares MSCI Brazil Index Fund (NYSEArca: EWZ) has suffered as a result. [Latin America ETFs Look for a Sputnik Moment.]
EGShares Brazil Infrastructure (NYSEArca: BRXX) is the lone ETF remaining above its trend line, but even its performance has suffered in the last several months.
- According to Bloomberg BusinessWeek, the inflation rate in Brazil is the highest it’s been in a January in six years at 0.83%. Inflation was a huge problem for the country before it tackled the problem and began its current resurgence.
- Luciana Lopez, Jeferson Ribeiro and Guillermo Parra-Bernal for Reuters report that Brazil’s government also unveiled budget cuts equal to $30 billion. The officials intend for this to quell inflation and to help interest rates sink back down. Most of the social programs and infrastructure spending will not be touched.
Josh Lipton for Minyanville reports that the Brazilian economy is similar to China’s: they were the crusading countries to recover first from the global meltdown, and now they are in a weaker position. A possible bear market in Brazil is not out of the question, but for now it’s wait and see. [Is Brazil ETF a Smart Investment?]
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.