The Bovespa stock index is down 13.7% year-to-date, headed for the deepest annual slide since 2013, when Brazil was descending into a serious domestic crisis. The Bovespa is trading at 102,741 points, close to its lowest level in 12 months.
Local markets are facing a surge of fiscal worries after the government relaxed its grip on the budget in a move seen as a sacrifice of austerity to shore up President Jair Bolsonaro's dwindling re-election chances.
There are growing prospects of higher interest rates in the United States due to fears of a resurgence of the Pandemic due to the Omicron variant of COVID-19.
The Bovespa's stock exchange values are now so cheap that they should recover 17.3% from Tuesday's level, finishing next year at 120,500 points, according to the median estimate of 12 equity strategists polled Nov. 16 -- 30.
The degree of uncertainty in Brazil is such that domestic assets have dropped to historically low levels considering price earnings ratios, Joao Guilherme Penteado, CEO of Apollo Investimentos, said.
He said that the 2022 election could be the most difficult for the country in the last 30 years because of the positive bias for Brazilian assets.
Former President Luiz Inacio Lula da Silva leads opinion polls and last week met French President Emmanuel Macron, sparking an angry reaction from Bolsonaro https: www.reuters. Neither has officially declared their candidacy for the Oct. 2022 vote.
The encounter with Macron and its fallout show how Lula tries to capitalize on Bolsonaro's diplomatic isolation. In 2018, the Supreme Court of Brazil overturned Lula's conviction in 2018 on charges of taking bribes from engineering companies.
The Bovespa has been weighed down by mounting doubts about Brazil's politics. The median estimate of 114,000 points by mid- 2022 was well below 130,000 points seen in August.
Economic worries have added downward pressures on Brazilian stocks. According to a separate Reuters poll, high inflation and slow growth are expected to continue next year.
Mexico's S&P BMV IPC stock index is up 11.6% so far in 2021, on track for its biggest annual gain since 2012. The index was 49,171 points on Tuesday, and investors expect further gains next year.
Mexico's IPC was expected to reach 56,250 points at the end of 2022, a 14.4% increase from where it was hovering on this week, getting close to the year's record levels just above 53,000 in the second half.