iShares MSCI Brazil ETF

EWZ

Market cap $6.52B

Inflation is expected to remain sticky and GDP expected to range between 1.7 to 2.1% in 2026. The U.S. may avoid stagflation, but mild forms are present and may linger. While investors won't likely need to pull out the 1970s-1980s investment playbook, they are wise to consider the best stocks for mild stagflation. Classic stagflation investments include precious metals, consumer staples with pricing power, defensive healthcare, multi-line insurers, and some utilities.

Single-country funds can reduce overall portfolio risk by acting differently than the S&P 500, offering diversification beyond broad international indexes.

Part of the rally in Latin America stock funds is currency-related. But another driver is that the stocks are exceptionally cheap.

iShares MSCI Brazil ETF remains an attractive play for 2025, driven by BRL appreciation against the USD and appealing valuations. High-interest rates in Brazil and lower interest rates in the U.S. attract foreign capital, supporting inflows into stocks. Brazilian companies should continue to benefit from lower costs on dollar-denominated debt, improving earnings.

The iShares MSCI Brazil-Capped ETF is rated a "Buy," supported by strong recent momentum and compelling valuation metrics. EWZ offers exposure to large- and mid-cap Brazilian equities, with a focus on value sectors like Financials and Energy. The ETF trades at a low 9.2x P/E and a PEG ratio below one, with a high 5.13% dividend yield, making it attractive for investors.

Brazilian stocks saw a strong recovery in August, going up 6% on the month according to the benchmark Ibovespa index. XP Asset's equity funds outperformed further, with returns between 8 and 9%.

Brazil's former president, Jair Bolsonaro, goes on trial in his country, and U.S. President Donald Trump attempt to stop the trial with tariffs backfired. The markets are watching for new developments.

Brazil's government unveiled on Wednesday a long-awaited aid package for companies hurt by steep U.S. tariffs, centered on credit lines for exporters and government purchases of products that face greater hurdles in finding alternative markets.

CAVA shares plunged 22% after Q2 same-restaurant sales growth of 2.1% missed expectations, despite 20.3% revenue growth and solid new restaurant openings. Brazil announced $5.6 billion in aid to exporters after the U.S. hiked tariffs, with further support packages planned for affected industries.

Trump's new executive order sharply raises U.S. tariffs on Brazilian imports, with an effective average tariff now at 32.7%, a unique case globally. The GDP impact for Brazil is likely a 0.4%–0.6% hit, but diversification and exemptions will soften the blow; inflation effects should be minor and temporary.