Jens Nordvig, founder of Exante Data, argued Brazil’s economy should be growing much faster after its contraction in 2016.
“They just had the biggest recession literally in the history of economic statistics. Coming out of a recession like that, you should have like 4, 5, 6, 7 percent growth for a number of years and they just have not had that,” Nordvig todl CNBC, attributing the lackluster rebound some of Brazil’s structural issues, like an overcrowded pension system.
Furthermore, Brazilian stocks are expected to strengthen on the slowdown in U.S. Federal Reserve rate hikes, which is also expected to boost broader emerging markets as the U.S. dollar loses its support. Brazil’s market is also expected to benefit from a privatization and deregulation under the Bolsonaro administration.
“Inflation expectations have moderated and the perception of a dovish Fed strengthens the case for [the Brazilian central bank]to stand pat,” strategists at MRB Partners wrote in a note earlier this month. “The new government’s bias in favor of privatization and smaller government will support a re-rating in a number of listed state-controlled enterprises.”
For more information on the Brazilian markets, visit our Brazil category.