Fascists are good for stocks

Investors are looking forward to the inauguration of the terrifying fascist Jair Bolsonaro as president of Brazil on January 1. And they look to dreading the inauguration of the moderate social democrat Andrés Manuel López Obrador (aka AMLO) as president of Mexico on December 1.

Graphed below are indexes representing the two countries’ stock markets—or, more specifically, shares traded on the New York Stock Exchange designed to mimic those indexes. (The history of the Mexico index is here; of Brazil, here.) The top graph is a long-term view. It shows that the two countries’ stock markets moved pretty much together from the indexes’ inception through 2011. They parted ways in 2011, as Brazil drifted into a profound economic and political crisis. Brazil recovered beginning in early 2016 as Mexico moved sideways.

But the two indexes really began diverging a few weeks ago. AMLO was elected on July 1; Mexican stocks showed little reaction at first. But in recent weeks, as his inauguration came closer, anxiety has set in. By contrast, Bolsonaro won the first round election on October 7, but didn’t get 50% of the vote, requiring a runoff. He won that soundly on October 28. Since from before the first round it was clear Bolsonaro was likely to win, stocks began rising in mid-September, and have continued to rise.

The contrast is stark if you look at just the month of October. Since October 1, Mexican stocks are down 17.9%; Brazil’s are up 19.4%. ALMO promises rather mild reforms, and investors panic. Bolsonaro promises to destroy the left, deploy death squads to “fight crime,” steal resources from indigenous populations, and shower big business with favors, and investors celebrate.

What’s the spilling of blood when there’s money to be made?

Mexico vs Brazil stox

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