As practitioners of active investment risk-management, we are always very cognizant of both the risk and reward side of the investment equation. Lately, it seems like our focus has been more geared toward the risk side. That hasn’t been a conscious decision, though. As we have mentioned before, we try to go where the data leads us and very recently, much of the U.S. equity data has been tilted to the bearish side. One area where that is less so is foreign markets.
Look at Brazil, for example. Back on May 18, amid another presidential scandal in the country, Brazil’s benchmark Bovespa stock index was sent crashing. Down over 10% at one point in the day, the index still closed down by 8.8%.
**Related: Here is our May 18 Premium Post, “Special Report: Brazil”, sent to The Lyons Share members, amid the crash, noting key support levels being reached at the time in Brazil and Latin America.
The Bovespa would bounce off of those May 18 lows temporarily, before re-testing them in mid-June. Over the past 2 months, the index has been on a steady ride higher. And, in fact, over the past few days, the Bovespa has eclipsed its previous peaks just south of 69,000 set in February and just prior to the May crash.
So what does this mean for the Bovespa? First off, the breach of the previous peaks opens immediate upside in the index to its all-time highs above 73,000 set back in 2008 and 2010. Beyond that, we may be witnessing the start of a new longer-term up-leg that will take the Bovespa well beyond its former highs.
At a minimum, this development reminds us to keep a lookout all around the world for potential reward opportunities, especially given the possible growing risk in U.S. equities.