Messed-up economy equals big stock market gains? The answer is yes, sometimes. What's going on right now around global stock exchanges is a prime example.
Brazil's yearlong political crises hit its crescendo in late August after politicians voted to remove its president, Dilma Rousseff, from office. It took months to actually oust Rousseff, who has been accused of illegally manipulating the federal budget by artificially enhancing a budget surplus. Headlines related to the scandal aren't slowing — former Brazilian president Luiz Inácio Lula da Silva is now being tried for corruption, too.
Yet year-to-date the Brazil stock market has climbed 66 percent, which is a major reversal from the 41 percent decline it experienced in 2015.
Russia shares something in common with Brazil — they've both been hard-hit by the oil crash. Russia has also been busy invading neighbors as its petro-led GDP shrank by 40 percent year-over-year. But there's been no hangover in Russian stocks, which have seen massive gains — the VanEck Vectors Russian Small-Cap ETF (RSXJ) is up 62 percent this year, according to data from XTF.com.
Big drops in emerging economies are often followed by big gains. Maybe you've heard it put this way (not about the laws of physics but about stocks): What goes down must come up. It's a trading insight with big, opportunistic profit implications. Though admittedly, not for the feint of heart.