Scandal-Fueled Crash Behind Them, Brazilian Stocks Are Officially Back (EWZ)

Image of Brazil flag flying

From Dana Lyons: Brazil’s stock market has recouped its May crash loss and is now hitting 6-year highs.

As practitioners of active investment risk-management, we are always very cognizant of both the risk and reward side of the investment equation. Lately, it seems like our focus has been more geared toward the risk side. That hasn’t been a conscious decision, though. As we have mentioned before, we try to go where the data leads us and very recently, much of the U.S. equity data has been tilted to the bearish side. One area where that is less so is foreign markets.

Look at Brazil, for example. Back on May 18, amid another presidential scandal in the country, Brazil’s benchmark Bovespa stock index was sent crashing. Down over 10% at one point in the day, the index still closed down by 8.8%.

**Related: Here is our May 18 Premium Post, Special Report: Brazil”, sent to The Lyons Share members, amid the crash, noting key support levels being reached at the time in Brazil and Latin America.

The Bovespa would bounce off of those May 18 lows temporarily, before re-testing them in mid-June. Over the past 2 months, the index has been on a steady ride higher. And, in fact, over the past few days, the Bovespa has eclipsed its previous peaks just south of 69,000 set in February and just prior to the May crash.

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So what does this mean for the Bovespa? First off, the breach of the previous peaks opens immediate upside in the index to its all-time highs above 73,000 set back in 2008 and 2010. Beyond that, we may be witnessing the start of a new longer-term up-leg that will take the Bovespa well beyond its former highs.

At a minimum, this development reminds us to keep a lookout all around the world for potential reward opportunities, especially given the possible growing risk in U.S. equities.

In a premium post at The Lyons Share, we lay out our specific strategy for taking advantage of this opportunity in Brazilian stocks.

 

The iShares MSCI Brazil Index ETF (NYSE:EWZ) was unchanged in premarket trading Friday. Year-to-date, EWZ has gained 21.86%, versus a 10.16% rise in the benchmark S&P 500 index during the same period.

EWZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 23 ETFs in the Latin America ETFs category.


If you’re interested in the “all-access” version of our charts and research, we invite you to check out our new site, The Lyons Share, where we are currently running our PRE-“FALL” SALE. Considering the discounted cost and the current market juncture, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

This article is brought to you courtesy of Dana Lyons, JLFMI and My401kPro.