Itaú BBA has raised its forecast for Brazil’s Ibovespa index, predicting it will reach 165,000 points by the end of 2025.
This marks a nearly 14% increase from the 145,000 points expected at the end of this year. Daniel Gewehr’s team has prioritized Brazil over other Latin American markets.
Analysts see compelling valuations. The Earnings Yield Gap, which measures earnings versus price adjusted for real interest rates, is now at 6.3%. This figure exceeds the historical average of 4.9%.
They expect Brazilian companies to grow their earnings by around 12% from 2024 to 2025. However, international investors have been slow to return to Brazilian stocks.
Currently, net foreign flows are negative. Equity funds account for just 8.8% of all assets under management in the funds industry, down from a recent high of nearly 10%.
The macroeconomic outlook remains slightly negative due to fiscal concerns and uncertainties about future interest rate decisions.
The market expects the Central Bank to raise the Selic rate at its next meeting on September 17 and 18.
Strategic stock selections
Itaú BBA has outlined four main themes for picking stocks that can benefit from the current market.
The first topic focuses on bond proxies, which are stocks that act like bonds and offer high real returns. This category includes Equatorial (EQTL3), Eletrobras (ELET3) and Santos Brasil (STBP3).
The bank also recommends high-quality cyclical companies. These include construction firm Direcional, Bradesco bank and B3 stock exchange.
For long-term growth, they suggest outsourcing group GPS (GGPS3) and healthcare provider Rede D’Or (RDOR3).
Additionally, they see commodities like pulp producer Suzano ( SUZB3 ) and oil company PRIO ( PRIO3 ) attractively valued.
With this strategic focus, Itaú BBA shows a confident but cautious approach to investing in the growth and potential of the Brazilian market.
This reflects an optimistic outlook for those watching Brazilian markets amid global economic changes.
Itaú BBA predicts bright future for Brazil’s stock market with strategic insights
