BRICS, weak equities and dollar influence
There is a lot of talk about BRICS and their role on the world economic scenario in the near future. In the financial markets, the strength of this group of countries is not yet apparent, and the influence of the dollar remains strong.
The chart below compares the performance of the MSCI BRIC index with that of global equities over the past 10 years. The downward trend in the indicator is evident, signaling an underperformance of the Brics relative to the global benchmark. A trend that gets worse when looking at the position of the main exponential moving averages.
If we limit the comparison to emerging economies, the situation, at least in terms of the most recent trend, does not change.
If the BRICS dominated over emerging equities in the pre-pandemic period, the situation has markedly changed from 2020 onward. Supply chain diversification and geopolitical tensions are among the variables behind this behavior.
Finally, a look at the correlation between BRICS equity performance and the Dollar Index. The ratio is consistently below zero over the ten years considered, with the 5-year average standing at -0.56. The growth capacity of these economies continues to be closely linked to the performance of the U.S. currency. The strengthening of the latter makes imports more expensive, affects price levels and monetary policy in the BRICS countries. The obvious “desire for emancipation” expressed by the countries belonging to the organization also emerges from here.
