Brazil’s Ibovespa exhibited resilience in the face of U.S. market sell-offs, dropping only 0.41%. Contributing factors included a favorable recommendation from J.P. Morgan and the relative stability of the Brazilian economy. Commodity stocks suffered losses, but the overall market remained stable, bolstered by expectations surrounding the 2026 elections and a focus on value stocks.
Despite a sharp sell-off in U.S. markets due to recession fears, Brazil’s Ibovespa index demonstrated resilience, dropping only 0.41% to close at 124,519 points on October 10. While Wall Street faced significant losses, primarily in technology stocks, the Ibovespa remained stable, helped by a buy recommendation from J.P. Morgan. This recommendation played a crucial role in limiting the index’s downswing amid prevailing global risk aversion.
Concerns about a potential economic slowdown in the U.S. emerged from disappointing economic data, which, coupled with sluggish demand from China, sparked widespread anxiety in global markets. Ricardo Maluf, head of equity trading at Warren, noted that these factors contributed to heightened recession fears, particularly as recent indicators suggested declining inflation and weak demand in China. Additionally, recent U.S. employment figures exacerbated worries regarding a recession.
Commodity-linked stocks, sensitive to the downturn in Chinese demand, experienced losses. Vale’s shares decreased by 1.62%, while CSN and CSN Mineração fell by 1.59% and 0.91%, respectively. Petrobras shares closed nearly unchanged, with preferred shares dropping by 0.03% and common shares declining by 0.19%.
Pedro Gonzaga, chief equity analyst at Mantaro Capital, identified several factors contributing to the Ibovespa’s performance. A significant factor was J.P. Morgan’s upgrade of Brazilian stocks from neutral to overweight while downgrading Mexican equities to neutral. J.P. Morgan’s equity strategy team emphasized the appeal of the Brazilian market due to attractive valuations, the conclusion of Brazil’s monetary tightening cycle, and prospects surrounding the 2026 elections.
In the report authored by Emy Shayo, J.P. Morgan indicated that Brazilian assets might benefit from favorable global conditions as long as the U.S. avoids a recession. The early electoral cycle in Brazil was highlighted as a factor that enhances investment appeal, suggesting potential regime change in 2026.
Mr. Gonzaga remarked that Brazil’s economy is more insulated from global trade tensions, thereby fostering the Ibovespa’s resilience. He noted that Brazilian firms typically trade at lower multiples and that recent polls suggesting a shift in leadership by 2026 contributed to positive market sentiment.
Mr. Maluf pointed out the Ibovespa’s inclination toward value stocks rather than growth stocks, which are prevalent in the tech sector that suffered heavily in the U.S. He indicated that the index’s traditional profile involves companies with stable fundamentals and lower price-to-earnings ratios. Presently, global markets appear to be transitioning from growth stocks to value-oriented investments.
In conclusion, Brazil’s Ibovespa index has demonstrated remarkable resilience amid a global sell-off in markets, primarily influenced by U.S. recession fears. A strategic recommendation from J.P. Morgan has bolstered confidence in Brazilian stocks, amid broader economic uncertainties. The relative stability of the Brazilian economy, its focus on value stocks, and lower exposure to the technology sector have all contributed to the index’s limited downside, suggesting a favorable outlook as the 2026 elections approach.
Original Source: valorinternational.globo.com
