Risk Takes Center Stage

Global markets pared gains last week as concerns over trade and contagion in the emerging markets came closer into focus. The MSCI world index lost 1.69% while the S&P Index lost 0.98%.

Brazilian Front Runner Stabbed

Jair Bolsonaro, the front runner in the Brazilian election was stabbed during a rally. He is currently in stable condition. Bolsonaro, a deeply divisive candidate, received a surge in public opinion after the attack. Current polls show a runoff election between Haddad and Bolsonaro within a 1% margin of error. The broader markets rallied on news of the improved polls. Haddad (Lula’s replacement) is now facing corruption charges. Unlike Lula, Haddad will be able to run since the trial cannot occur prior to the elections. Year to date, the Brazilian economy has underperformed both the MSCI Emerging Market Index and the MSCI World Stock Index. Most of that is attributable to the currency depreciation. LOM funds have benefitted from being underweight in the country this year, only taking strategic bets.

Tech Leaders Meet Congress

Members of Twitter and Facebook met with US lawmakers on Wednesday to testify on foreign influence and accusations of bias against conservatives. Google declined to send a representative. The senators indicated that regulation may be in the pipeline. Shares of Twitter (-13.33%), Facebook (-7.22%) and Google (-4.38%) experienced sharp declines during the week. This came after news from Jeff Sessions of the Justice Department who was concerned that the social media platforms were “intentionally stifling the free exchange of ideas.” While regulation may reduce profitability, it tends to protect larger, established players.

Emerging Markets Currencies

Emerging market currencies showed signs of stabilization on Friday, led by gains in the Turkish lira. That said, there is still a lot of risk in the emerging market space, which has experienced a rough year. It is worth noting that the Lira showed signed of degradation again on Monday. The below chart shows the year to date Turkish lira per dollar spot rate. A dollar can by 70% more lira this year.


Many of the changes discussed today shouldn’t have long term impacts on the markets. The Brazilian elections are about a month away. A lot can change between now and then. The congressional hearing may have negatively impacted the tech sector but the proposed changes are more likely to help the established players more than hurt them. Based on what we can see today, the emerging markets space may not be completely out the woods yet. However, we are beginning to see long term value in many individual companies within this asset class. When an entire sector of the economy goes down because of individual actors (be it in tech or the EM space), there are usually opportunities to find good companies at a reasonable price.

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The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.