TLDR: The Coronavirus situation in Brazil is not fully appreciated.
I believe markets are underestimating the spread of the Coronavirus in Brazil, and I believe the “smart money” is chasing this hypothesis.
Global Coronavirus heatmaps indicate Brazil has one confirmed case (as of this post):
I believe the true number of cases may be much higher. Just like Germany, Brazil recently held Carnival – hundreds of thousands of people in confined space doing who knows what.
Long incubation period + close proximity + mass groups of people = rise in confirmed cases and negative market reaction (that’s the theory anyway).
Is anyone else looking into this? Looking at EWZ you wouldn’t necessarily think so. They’ve followed similar percentage declines as the S&P 500. But, using Google Trends, there has been a spike in “Coronavirus Brazil” searches and in the past month there has been a parabolic rise in these searches coming from. . . New York and D.C., among others.
Now do we think there’s a localized group of Brazilian nationals centered in financial districts frantically searching for what’s going on in Brazil? Or, since the amount of information coming out of South America is a fraction of the Western world, are hedge funds and speculators trying to get a leg up?
What’s the point? I’m not a doctor but I recall the 2016 Summer Olympics where Brazil couldn’t keep algae from growing in a pool.
Despite years of preparation (i.e., knowing the Olympics were coming), event organizers couldn’t keep algae from growing in an outdoor pool for two weeks. Do you think they are prepared to handle an epidemic? I hope so because these are people we’re talking about. Hoping for minimal quarantines and speedy recoveries, but hedging against downside.
Trade smart and take profits.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.