How Brazil became the top stock market of 2018

The election of Jair Bolsonaro as Brazil’s president boosted the São Paulo stock market to unprecedented levels. Ibovespa, the country’s benchmark index, hit its all-time high of 89.820 points on December 3, despite a meltdown of international markets – especially in emerging economies.

Not only the São Paulo stock exchange is one of the just four in the world to end 2018 in the positive side of zero – alongside with Argentina, India and New Zealand – but it is also, by far, the best performing global index in local currency. In other words, when it is not taken into account the fact that the Brazilian Real dropped some 13 percent against the U.S. Dollar.

Elsewhere, apprehension regarding the escalating trade war between China and the United States, concerns about the slowdown of the global economy and interest rates hikes by the Federal Reserve formed a recipe for generalized losses. In Brazil, In the three-and-a-half months between the start of the presidential campaign, on August 16, and the last trading session of the year, on December 28, the Brazilian market gained 14 percent.

In the meantime, major indexes from the U.S., Europe, and Asia plunged between 8 and 13 percent.

The Bolsonaro effect

The secret behind such a strong performance? Local investors. Foreigners actually pulled nearly BRL 11 billion (USD 2.8 billion) out of Brazil stocks this year, Bloomberg reports. “The market’s optimism with the new administration led to a decoupling of Brazil from the rest of the world,” says Tiago Reis, founder of investment consultancy Suno Research.

But how much of this performance can actually be attributed to a “Bolsonaro effect”? The answer cannot be entirely quantified. However, it is possible to identify the shares or groups of stocks which benefited the most and highlight the “winners” of this...