Fed punishes emerging markets, but Brazil will escape unscathed, says Goldman

Goldman Sachs lowered its forecast for the S&P 500 to 3,600 points from 4,300, slightly below current levels.

The revision came after the Federal Reserve indicated that interest rates would rise above market expectations, increasing the likelihood of a recession in the United States.

The rise in interest rates will punish emerging markets.

However, Brazil appears to be one of the few markets that could resist international monetary tightening.

Goldman is targeting a level of 116,000 points for the Ibovespa by the end of the year, an implied 6% appreciation from current levels.

According to Caesar Massry, Goldman’s chief emerging and global markets strategist, the real could also appreciate in an interview with Brazil Journal.

Unlike most of the rest of the world, the price of the U.S. currency could decline to R$5 in the next 12 months.

“The macrocycle in Brazil is well insulated in the short term because the central bank acted earlier compared to other central banks and raised rates aggressively and appropriately,” Massry says.

“The Brazilian CB deserves praise for being ahead of the game.

“Among emerging markets, our favorite equity markets are Brazil, India, and Indonesia,” says the Goldman strategist.

With information from Brazil Journal

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