“McDonald, who correctly called for a Brazil rally at the end of 2015, said several factors could hurt the country’s equities this year. A stronger U.S. dollar stands to hurt emerging markets, in which Brazil is included, and with elections coming up in 2018, political uncertainty could stand to take the equities off their course higher,” according to CNBC.
Banks in Latin America’s largest economy appear inexpensive, those institutions are faced with declining consumer credit quality. Analysts believe the same is true of Brazilian banks. After a couple of years of contracting, Brazil’s economy is expected to resume growing this year, a factor Brazilian stocks and ETFs could already be pricing in.
Financials are the largest sector weight in EWZ at more than double the allocation assigned to the ETF’s second-largest sector weight.
For more information on the Brazilian markets, visit our Brazil category.