Brazil Stock Market Valuations and Expected Future Returns

Updated at Tue, 02 Jun 2020 20:30:07 -0500
Country: Brazil (updated daily) check out Global Overview for detailed methodology.

Ratio of total market cap over GDP: Maximum - 106%; Minimum - 26%; current - 49.64%
Expected future annual return: 11.0%

ETF Used for dividend yield: EWZ (Yield=3.86%)
Market Index used: IBOVESPA
Current Annual GDP: $1,422 billion US dollars or 7,197 in billions of national currency (GDP in Local Current Prices Annual Growth=6.42%)
Data since year 1997

Brazil Historical GDP Growth

Historical GDP of Brazil in billions of national currency. The GDP in local current prices has grown at the annual rate of 6.42% over the past 8 years. Please note this growth rate includes the effect of price inflation and it is NOT the real GDP growth rate. Current Annual GDP: $1,422 billion US dollars or 7,197 in billions of national currency.

Brazil GDP (Billion, National Currency)

Historical Stock Market Cap

Historical total market of Brazil in billions of national currency. This value is normalized using the data published by WorldBank. IBOVESPA is used for the normalization. It is an index of about 50 stocks that are traded on the São Paulo Stock, Mercantile & Futures Exchange.

Brazil Total Market Cap (Billion, National Currency)

Historical Ratio of Total Market Cap over GDP (%)

The current ratio of total market cap over GDP for Brazil is 49.64%. The historical high was 106%; the historical low was 26%. If we assume that the ratio will reverse to the historical mean of 52% over the next 8 years, the contribution to expected annual return is 0.69%. This is the detailed historical chart of the ratio.

Brazil Ratio of Total Market Cap over GDP (%)

Predicted and Actual Returns

From the equation presented on the U.S. market valuation page,

Investment Return (%) = Dividend Yield (%) + Business Growth (%) + (Re/Rb)(1/T)-1

We can compute the predicted and actual returns of the Brazil stock market over a given time period, T. In the calculation, we set T to equal eight years, the approximate length of a full economic cycle. The calculated results are presented in the chart below. The green line indicates the expected, or predicted return if the market ratio trends near the average ratio of 52% over the next eight years.

The blue line indicates the actual, annualized return of the Brazil stock market over eight years. We use “IBOVESPA” to do the actual return calculation. We can see the calculations largely predicted the trend in the stock market as the blue line is closely parallel to the green line.

Predicted and Actual Returns of Brazil


The stock market of Brazil is expected to return 11.0% a year for the coming years. This is from the contribution of economic growth in local current prices: 6.42%, Dividend Yield: 3.86% and valuation reverse to the mean 0.69%.

This is the projected return of the stock market in Brazil relative to other countries. Click on each bar in the chart to go to other countries:

You can go here to see what international stocks Gurus are buying.

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