By Brazil Stock Guide – Brazil has gone from being described by Bank of America as the “new gold” of emerging markets to a more fragile trade being tested by global risk.
In a more recent report, after meetings with investors in London and Paris, BofA strategists David Beker and Paula Soto pointed to a clear change in tone toward Latin America. A few weeks earlier, clients were waiting for the war to end before adding more risk in the region. Now, the main question is whether they need to reduce exposure to Latin America even further.
The shift reflects a combination of higher oil prices, pressure on global interest rates, the risk of more persistent inflation and greater political uncertainty in countries such as Brazil, Colombia and Peru. A global rotation from value stocks into technology is also weighing on the relative appeal of Latin American equities.
That is a sharp change from mid-April. In a report published on April 14, titled “Brazil: the new gold?”, BofA said Brazilian equities and the real had been outperforming other emerging markets, supported by foreign inflows, a weaker dollar and a global search for yield.
The report, authored by David Beker and Natacha Perez, argued that years of underallocation to Latin America had created room for investors to rebuild exposure. Brazil stood out because it combined liquidity, commodity exposure and still-high real interest rates — a rare mix in the current global market.
At the time, the thesis looked increasingly close to being validated by prices. The Ibovespa was moving toward the symbolic 200,000-point mark, after BofA later raised its year-end 2026 target for the index to 210,000 points from 180,000. That breakout, however, never came. The benchmark is now around 176,000 points, turning what looked like momentum into a test of conviction.
In April, the bank even said Brazil was behaving like a “risk-free asset,” a reference to the simultaneous strength of the country’s stock market and currency. Political risk also appeared to be playing a smaller role in short-term pricing, with investors less convinced that an election would necessarily trigger a sharp selloff in Brazilian assets.
One week later, BofA reinforced its constructive view. In a separate report cited by Bloomberg Línea, the bank kept Brazil as its top overweight position among emerging markets, supported by expectations of a weaker dollar, continued foreign inflows, geopolitical de-escalation and gradual interest-rate cuts in Brazil.
BofA expected the Selic rate to fall to 13.25% by the end of 2026 and 12.50% in 2027, while forecasting 27% earnings-per-share growth for Brazilian domestic companies in 2026.
BofA has not, so far, signaled a formal reversal of its recommendation on Brazil or a public cut to its 210,000-point Ibovespa target. But the newer report shows that the investment case has narrowed — and the market move makes that shift harder to ignore.
In April, Brazil looked like a natural destination for global investors seeking liquidity, carry and emerging-market exposure. By May, those same drivers had become more conditional: the dollar needs to stay weak, global rates need to stabilize, oil prices need to stop feeding inflation fears and political noise needs to remain contained.
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