Brazil

Signals

Brazil Banks Drawdown+3 pts

Brazilian banks (ITUB, BBD) -8% in 5 days — banking sector stressWhy it matters: Brazilian banks are exposed to sovereign and FX risk; drawdowns signal systemic concerns

Brazil Credit Stress+2 pts

EM bond proxy (EMB) underperforming — Brazilian credit deteriorationWhy it matters: Credit stress in Brazil often precedes broader EM contagion

Brazil Credit Drawdown+2 pts

Brazil credit proxy -5% in 5 days — broad credit deteriorationWhy it matters: Sustained credit drawdown indicates deepening financial stress in Brazil

Brazil Market Drawdown+2 pts

Brazil ETF (EWZ) -5% in 5 days — broad Brazilian equity weaknessWhy it matters: Broad equity weakness confirms stress is affecting the wider Brazilian market

Real FX Stress+2 pts

BRL/USD move >3% in 3 days — real depreciation pressureWhy it matters: Rapid real weakening signals capital flight and potential central bank intervention

Brazil Volatility Elevated+1 pts

Brazil market volatility above 35 — elevated uncertaintyWhy it matters: Elevated volatility indicates market uncertainty and potential for sharp moves

Brazil Market Stable+0 pts

Brazil ETF (EWZ) holding above -3% over 5 days — no broad sell-offWhy it matters: Market stability indicator — if met, stress may be contained to specific sectors

Brazil Real Estate Drawdown+2 pts

Brazil REITs -10% in 5 days — property sector stressWhy it matters: Brazilian real estate stress often accompanies rate hikes and credit tightening

Brazil Market Stable+0 pts

Brazil ETF (EWZ) holding above -3% over 5 days — no broad sell-offWhy it matters: Market stability indicator — if met, stress may be contained to specific sectors

Instruments tracked

MKT — iShares MSCI Brazil ETF (EWZ)

Broadest Brazil equity proxy. Heavily weighted to commodities and financials. Sensitive to BRL moves.Calm 5d > -1% · Watch 5d -1% to -5% · Stress 5d < -5%

BANK — Brazilian Banks (Itaú, Bradesco)

Brazilian banks are exposed to sovereign risk, FX volatility, and consumer credit. Key systemic risk indicator.Calm 5d > -3% · Watch 5d -3% to -10% · Stress 5d < -10%

CRD — Brazil Credit / Sovereign Bond Proxy

Brazilian credit conditions. Weakness signals rising sovereign risk and potential EM contagion.Calm 5d > -1% · Watch 5d -1% to -3% · Stress 5d < -3%

RE — Brazil Real Estate Proxy

Brazilian property sector. Sensitive to interest rates (Selic) and domestic economic conditions.Calm 5d > -3% · Watch 5d -3% to -8% · Stress 5d < -8%

FX — Brazilian Real (BRL/USD)

Real depreciation increases USD-denominated debt burden and signals capital flight from Brazil.Calm 3d < +1% · Watch 3d +1% to +3% · Stress 3d > +3% depreciation

Past crises that hit Brazil

• COVID-19 CrashFeb 2020 – Mar 2020

  Fastest bear market in history. Global lockdowns caused simultaneous supply and demand shocks across all asset classes.

  Peak VIX 82.69 · S&P 500 drawdown -33.9%

• China Devaluation / EM CrisisAug 2015 – Feb 2016

  PBoC surprised markets with CNY devaluation, triggering global EM selloff and commodity crash. Oil fell below $30.

  Peak VIX 40.74 · S&P 500 drawdown -14.2%

• Taper TantrumMay 2013 – Sep 2013

  Fed signaled tapering QE. EM currencies and bonds sold off sharply as dollar strengthened.

  Peak VIX 21.91 · S&P 500 drawdown -5.8%