LatAm Equity Strategy: What matters for LatAm if USD strengthens

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LatAm Equity Strategy: What matters for LatAm if USD strengthens

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LatAm Equity Strategy

What matters for LatAm if USD

strengthens

Investment Strategy

Risks of a stronger dollar are piling up 24 June 2026 Corrected

We see risks for US rates to reprice higher, as our US economists now forecast 75bp of Investment Strategy

hikes this year, vs mkt pricing in less than 50bp hikes (see report: Market Tidbits). A Latin America

hawkish Fed could offset the benefits from the Iran deal for EM (see: Emerging David Beker >>

Convictions), and the deal itself may not necessarily mean a weaker USD (see: FX Quant Bz Econ/FI & LatAm EQ Strategy

Insight). As these risks mount, appetite for LatAm equities could stall but we see Merrill+55 11Lynch2188 (Brazil)4371

Brazilian equities as relatively insulated thanks to high local rates and rate-sensitive david.beker@bofa.com

sectors at already depressed levels (small caps down 18% from highs, in USD terms). Paula Andrea Soto, CFA >>

LatAm Equity Strategist

What to watch in LatAm as USD strength risks rise Merrill+55 11Lynch2188 (Brazil)4226

1. EM equities declined roughly 9% (annualized total USD returns) on average during paula.soto@bofa.com

periods of DXY appreciation since 2002 (Exhibit 1, Exhibit 3). And they do well when Mateus Conceicao >>

USD depreciates (Exhibit 2). Large OW positioning in EM equities (Global FMS (see Merrill Lynch (Brazil)

here)) remains a risk (Exhibit 4). +55 11 2188 4201 mateus.conceicao@bofa.com

2. Flows could be more resilient than some assume, since inflows into EM Anna Clara Malheiros >>

(ex‑China) increased in five of the past seven episodes of USD strength (Exhibit 5). LatAmMerrill LynchEquity (Brazil)Strategist

+55 11 2188 4232

3.