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Consumer Debt Triples In Brazil As Stocks Turn Bullish

Despite Brazil’s central bank reporting on Wednesday that 12.2% of borrowers from authorized financial institutions are in “risky indebtedness,” representing a tripling of Brazilians in that situation since 2019, Brazilian stocks are expected to rally by double-digits through the end-2023, according to a Reuters poll. 

Amid uncertainty about new government policies ahead of President-elect Luis Inacio Lula da Silva’s inauguration, and consumers facing debt difficulties, financial models show potential upside for Brazilian equities next year. 

The Bovespa stock index (.BVSP) could  rally 13% by end-2023. The index in 2022 has only risen 4%. Veteran trader Gareth Soloway has been tracking the iShares MSCI Brazil ETF (EWZ), an ETF that tracks the Brazilian market, and notes the Brazilian stock market has been consolidating for a long time. “I just absolutely love this chart,” he told GoldSilverBitcoin.”It’s really a remarkable chart. “If you go back to the lows of 2002, you had this epic bull run in the Brazilian stock market to 2008.”

Since then, there’s been nothing but consolidation, he says. “You haven’t made a new all time high—you haven’t even come close.” It’s a wedge pattern that is likely to eventually break out, Soloway notes. 

“And when it breaks out, this could be a monster mover to the upside,” he says. “The Brazilian market may even retest it’s all time highs, even though it’s now been 15 years or more since we made that top.”

Like his first election, Lula still makes markets uneasy.  Perhaps that is unreasonable, especially considering Brazil’s economic performance during his first presidency. After his first election, Lula ultimately appointed a moderate to lead the central bank, which eased markets and then oversaw an economic boom. Brazil was dubbed a BRIC nation alongside Russia, India, and China. 

“Brazil is one of these economies that’s emerging again,” said Soloway.