Brazil stocks have taken a beating. Here's why I see opportunity
CNBC · Stephanie Link ·
Despite recent election-driven volatility, Brazil's long-term economic prospects make the iShares MSCI Brazil ETF (EWZ) an attractive investment opportunity, says investor Stephanie Link.
I own the iShares MSCI Brazil ETF , and the past few weeks have been a roller coaster. The fund has seen wild swings following Brazil's presidential election , but I think the selloff has created a buying opportunity. Launched in 2000, the fund gives exposure to some of Brazil's largest publicly traded companies, including banking giants Itaú Unibanco and Nu Holdings and oil producer Petrobras. It's heavily weighted toward financial services and energy, giving investors exposure to major Brazilian banks, oil producers and mining companies. Key points Brazil's economic fundamentals remain strong, with low unemployment and a resilient economy. A relatively young population and substantial foreign investment give a foundation for long-term growth. Opportunities in agriculture and fintech give Brazil multiple ways to expand its economy. On Oct. 5, EWZ surged roughly 13% after right-wing candidate Flávio Bolsonaro finished first in the initial round of voting. That marked just the fifth time in the ETF's history that it had posted a double-digit gain in a single session. I've never seen an ETF move like that. But the optimism didn't last. On Oct. 26, EWZ tumbled nearly 20% after incumbent President Luiz Inácio Lula da Silva won the runoff . I think a lot of that volatility came down to crowded positioning. In the four weeks leading up to the runoff, investors poured roughly $4 billion into EWZ, reflecting growing confidence in a Bolsonaro victory. When the election went the other way, investors rushed to unwind those positions. But the market's reaction overlooks the bigger picture. Brazil has a lot going for it economically, and that's a big reason I own EWZ. Why I'm buying Strong economic fundamentals Brazil's economy has demonstrated considerable strength. During Lula's roughly 12 years in office, the Brazilian real has appreciated about 31%, while the equity market has gained approximately 135%. Unemployment has averaged roughly 6.7% and was recently as low as 5.3%. The International Monetary Fund expects Brazil's economy to grow 2.2% in 2026. Those numbers point to an economy that's continuing to grow, even amid political uncertainty. Favorable demographics and global investment With a population of roughly 214 million and a median age of around 35, the country has a relatively young population that can support consumer spending and workforce growth. Brazil is also the largest economy in Latin America, giving investors exposure to a substantial domestic market. EWZ YTD mountain iShares MSCI Brazil ETF, YTD Foreign direct investment totaled approximately $88 billion over the 12 months through September, equivalent to about 3.4% of GDP, according to Brazil's central bank. I expect that figure to approach $100 billion by year-end. Growth opportunities across several industries Agriculture is already a major part of the economy, with Brazil playing an important role in global food production and exports. Then there's fintech. With a large population and growing demand for digital financial services, I see opportunities for companies that can make banking and payments more accessible. Power is another area that has my attention. Roughly 87% of Brazil's electricity was generated from renewable sources in 2025, according to Brazil's Ministry of Mines and Energy . That puts Brazil in a strong position to benefit as AI and data centers drive up demand for electricity. Why now? The recent election-driven selloff has created what I see as an opportunity to add to my position at a more attractive price. After climbing above $42 in October, EWZ has tumbled to around $32, giving back much of its gains for the year. I think the sharp reversal reflects a sudden shift in investor sentiment rather than a deterioration in Brazil's economic fundamentals. Bottom line Changes in government policy, currency fluctuations and shifts in global investor sentiment could continue to create volatility for Brazilian stocks. But I'm focused on the bigger picture: a growing economy, favorable demographics, strong foreign investment and several promising industries. I owned EWZ before the election, and the recent volatility hasn't changed my conviction. Stephanie Link is the Chief Investment Strategist at Hightower Advisors, where her division manages $8.5 billion in assets (as of June 4, 2026). She has 35 years of experience managing money and serves on KKR's investment council. She earned a B.S. in finance from Boston College. Disclosures: Link owns in Hightower Advisors. 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