Brazilian Equities Under Pressure

With market  volatility  back in the global markets with a vengeance, and the  US Dollar  remaining strong, one EM equity market that has been hit particularly hard this year has been the Brazilian Stocks ( EWZ ). Sluggish growth forecasts, combined with waning support for the Brazilian President, has sent Brazilian Stocks to its lowest level of the year so far, down -2.94%. 

The sharp declines have also been fueled by uncertainty over the  US-China  trade talks on a macro level. The combination of these two forces, the external macro headwinds and weak domestic economy, have both been a perfect storm for the under-performance of Brazilian stocks in 2019 thus far. Furthermore, on a technical basis, the EWZ continues to show deterioration within the equity market, with the 50-day  EMA  acting as a strong resistance March 2019 and the price action failing to break above since then. 

We believe that is these headwinds continue, there will be more downside for Brazilian stocks to come. We caution investors against this equity market.