Brazil Equity Strategy: Looking Back to Move Forward

The report reviews 10 "shock" events since the start of this century to compare de-rating size and recovery time across IBOVESPA, MSCI Brazil, the BRL and local rates. Equities move more than other assets, with MSCI Brazil the most sensitive (average -25.2%), while the BRL recovered slowest (average 263 days) and never returned to pre-shock levels in the Taper Tantrum and truckers' strike episodes; rates took about 256 days and the Ibov about 123 days on average. Of the 12 circuit breakers this century, returns were typically negative in the first month but strongly positive after one year. Comparisons with LatAm election surprises (Chile, Mexico, Argentina, Peru) show a wide range of drawdowns and recovery times;