JPMorgan strategists Emy Shayo and Cinthya Mizuguchi have reevaluated their bullish stance on Brazil’s stock market due to potential political interventions and global challenges.
They base their optimism on three factors: expected lower interest rates, attractive stock valuations, and a decline in political risks.
They recommend reassessing due to possible interest rate cut delays in developed economies and Brazil’s political climate.
The strategists revised the U.S. GDP growth forecast to 2.3%, expecting slower Federal Reserve rate cuts than previously anticipated.
They also highlight concerns over the declining popularity of Brazil‘s president, potentially leading to increased political activism to boost approval ratings.
JPMorgan Keeps Faith in Brazil Despite Concern.(Photo Internet reproduction)
Despite concerns, Shayo and Mizuguchi anticipate positive trends for Brazil, upgrading the 2024 GDP growth projection from 1.6% to 2.2%.
They anticipate stable fiscal policy, no immediate changes, predicting Selic rate to stabilize at 9.5% with possible adjustments.
Recent political developments, including proposed changes at Eletrobras and a R$300 billion industrial policy plan, signal a shift from a period of political de-leveraging to a more neutral phase.
However, strategists believe micro and sectoral risks have decreased due to stronger fundamentals, governance, and limited government subsidies.
They identify state-owned enterprises and sectors such as public concessions, construction, education, banking, and healthcare as facing the highest regulatory risks.
Shayo and Mizuguchi, cautiously optimistic, view Congress as a counterbalance to potential leftist policy shifts, given the solid economic team.