LatAm Equity Strategist: Limited rate cuts and weaker earnings – Brazil to marketweight

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LatAm Equity Strategist: Limited rate cuts and weaker earnings – Brazil to marketweight

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LatAm Equity Strategist

Limited rate cuts and weaker earnings –

Brazil to marketweight

Investment Strategy

LatAm loses momentum as external/internal support fades 09 June 2026

LatAm is down 14% from peak on April 14th, as Fed expectations turn more hawkish, Investment Strategy

USD appreciates, AI-led stories remain center stage while domestic narratives lose Latin America

steam. The global market reaction to a strong US payroll print last week was the

epicenter of this global shift. In Brazil, reduced scope for rate cuts removes an important David Beker >>

domestic catalyst (we expect Selic at 14.25% at year-end, see note) whilst volatility rises Bz Econ/FI & LatAm EQ Strategy Merrill Lynch (Brazil)

during the electoral race. We turn more cautious in Brazil we move Brazil to +55 11 2188 4371

marketweight, add exposure to Chile and Colombia, remain overweight Argentina, david.beker@bofa.com

marketweight Mexico and keep some exposure to Peru (portfolios in Exhibit 3-7; country Paula Andrea Soto, CFA >> LatAm Equity Strategist

summary on page 2). Merrill Lynch (Brazil)

+55 11 2188 4226

Moving Brazil down to marketweight (from overweight) paula.soto@bofa.com

We move Brazil to marketweight (from overweight since January 2026), reflecting a Carlos Peyrelongue >> Mex Eq Strat/Research Analyst

more challenging rates outlook and softer earnings expectations. Our economics team Merrill Lynch (Mexico)

now sees the Selic rate at 14.25% by YE26 (from 13.25%), implying only one remaining +52carlos.peyrelongue@bofa.com55 5201 3276

cut in June followed by a prolonged pause. Inflation risks remain skewed to the upside Mateus Conceicao >>