This article was originally published on ETFTrends.com.
The surging Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) continued its rise after steep sell-offs in the Dow Jones Industrial Average the last two trading sessions, which left the capital markets in a daze, causing the Dow to lose over 1,300 points. BRZU wasn't immune to the negative market contagion, but today, the leveraged ETF resumed its upward trajectory, gaining almost 6% as the country readies itself for an important presidential runoff election on October 28.
The first round of the election saw far-right presidential candidate Jair Bolsonaro take the early lead with a better-than-expected 46.7% of the votes last weekend with Fernando Haddad coming in second with 28.5%. Like U.S. President Donald Trump in 2016, Bolsonaro was billed as the wild card candidate who was a departure from political norms.
“I voted for Bolsonaro because I’m tired of politicians being the same,” said Maria Aparecida de Oliveira, a 63-year-old housekeeper. “Even if he is a little crazy, someone needs to bring change.”
Investor interest in Brazil as of late has been evident in the performance of BRZU, which has gained 33% month-to-date. Compared to the Dow the last five days, it's been a consistent outperformer as evidenced in the chart below:
With the run-off election looming towards the end of this month, the economy continues to be first and foremost on the minds of Brazilian voters as the country has been slow to recovery after it experienced its worst recession to date. Unemployment levels remain high with double-digit figures and the country is drowning in public debt--74% of Brazil's GDP.
While the annual GDP growth has posted positive gains as of late, it's still not at a level where economists are optimistic about the future growth prospects. The idea situation to address Brazil's current financial woes is to elect a president who is market-friendly to help stymie the issues by effecting policies that favor economic expansion and growth.
With a much-needed shock to its political system, Bolsnaro could be the solution that Brazil needs and if his policies, if elected, materialize in an improving economy, BRZU will benefit.
Regardless of the winner, the International Monetary Fund predicts that Brazil's economy will continue growth through 2018 and next year. Per an article from IG Markets, "When the International Monetary Fund (IMF) released its World Economic Outlook for 2018 and 2019, it renewed investor confidence in Brazil’s economic growth. The IMF predicted that Brazil’s economic outlook in 2018 would include 2.3% growth in GDP, with a further 2.5% growth in 2019."
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