This time last week Brazil chose to keep the same president for the next four years. Leading up to the election VXEWZ rose into the low 70’s and set record for the highest close. Do keep in mind VXEWZ data goes back to 2011 so ‘history’ is not that long. This past week the Brazilian market was all over the place, dropping on Monday as the business community was not thrilled with the status quo in leadership. By the end of the week EWZ had rallied based on an interest rate hike, buy VXEWZ remained relatively high considering the election has passed.
The emerging market space as a whole had a good week with EEM rising 2.75%. The EEM performance combined with strong performance in the US markets pushed VXEEM down 10% for the week.
The VXEEM curve is in contango, although a bit steep when the index is compared to the front month November future. VXEWZ is still in backwardation which surprises me as I expected a return to ‘normal’ after the election had passed.