The Latin American Turnaround

Early in the summer Latin American stocks took a dive. The decline was due to political scandals in Brazil, the largest economy and market in South American by far. I told Retirement Watch readers to hold our positions in Latin American stocks. The fundamentals were fine, I argued, and they soon would assert dominance over the political scandals. As this post makes clear, that’s what happened. The investments now are back to where they were before the dip.

The news sent the Brazilian Benchmark Ibovespa down nearly 9% in a single day in a move that was more reminiscent of the 1990s when emerging markets were extremely volatile rather than the current lower volatility era for the region. What a difference ten weeks can make though. While the Ibovespa didn’t exactly experience a v-shape bounce, the rebound has been swift. In the last two days, the index has rallied more than 2% and is back within spitting distance of the levels it traded at before the investigation was disclosed after rallying more than 12% from its lows.