In September, Standard & Poor’s downgraded Brazil’s sovereign credit rating to junk status, becoming the first major ratings agency to do so. Even after the retreat, Brazilian stocks may have further to fall as the economic contraction worsens.
“Higher inflation and lower real interest rates would therefore become the path of least resistance. The market has been pricing this in. Consensus 2016 inflation forecasts now stand at 7.6% compared to 6.7% in December last year. However, since late January, the market has been pricing out this higher inflation scenario,” adds RBC in the Barron’s article.
iShares MSCI Brazil Capped ETF
