This week, the São Paulo stock market index reached its all-time nominal high, breaking the 100,000-point barrier and bringing some symbolic joy to Brazilian investors. On the same day, the Central Bank’s weekly survey of financial institutions showed that investors have lowered their expectations for the GDP growth of the country, from 2.28 to 2.01 percent.
How can Brazil be in a bull market, while the real economy remains sluggish? And how long will the stock market frenzy last?
The very nature of how markets—and business cycles—work can bring a possible explanation for what we are seeing. The market tends to anticipate economic movements, therefore growth and recession periods are normally felt in advance.