Quite possibly too optimistic. Sao Paulo and SE Brazil was anti Dilma in the election. But they are stuck with her like the rest of the Country. I'm just not certain how QE throughout Developed economies ends. If it is so easy to sidestep cleansing effects of recessions and depressions, then it would have been used more frequently. The past suggests that imbalances develop and will rear up at some time. Developed markets are at 0% long term rates. What is the next arrow in the quiver of the FED? or the EU (more QE?). Emerging markets have considerable room to cut rates to stimulate their economies. This was a major tailwind for the US economy in the 1980's. However, I think the trade gap will have to narrow before things look better.
The QE effect isn't just hitting Brazil; Vietnam, Turkey, Korea etc are all experiencing currency devaluation relative to the dollar. I think the currency adjustments will become a tailwind at some point (products get cheaper to export to world markets). Brazil and Asia (maybe excluding Mainland China) should benefit. What will keep the US dollar strong (the FED increasing interest rates?). More than likely, the party in power in the US would not mind seeing the currency weaken somewhat going into the election. Can this weakening be acheived in a controlled manner?
Trade imbalances are likely to develop if the US dollar stays strong long term. I think the currency tailwinds and Emerging Market turnaround is probably a 2016 story. However, they might provide a non-correlated investment, a bet I'm willing to make with a small fraction of my portfolio.
Regards
FL
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