Does Brazil have a bright future because of the US's instability?

As the US upends the global order, investors should start searching for the long-term winners and losers

Starting in Brazil might be a good idea.

In the Middle East, every week is a wild ride. A few weeks ago, almost no one would have predicted how calmly the markets would handle the swings. When you look at which industries are doing well or poorly, there's more volatility beneath the headlines, but it's getting harder to understand why global stocks haven't changed much since America and Israel attacked Iran.

It's possible that investors are still hopeful that the crisis will end and things will return to normal. Although it is conceivable, the likelihood decreases as the disruption persists. Second, a lot of people believe that this is a turning point in both geopolitics and the economy, but they are unsure of the long-term consequences. If this is the case, it might be wiser to take minimal action and wait and see rather than overreacting dramatically.

It's possible that Brazil will win.

Who might benefit, then? The crisis will draw more attention to energy security, which should boost resource investment (medium-term) and commodity prices (short-term). Perhaps this will benefit Brazil from a top-down perspective. Although this economy has a long history of broken promises, it has performed admirably during earlier resource booms.

Problems with BFIA today. Although it hasn't moved much during this crisis, the Brazilian market has increased significantly over the past year. Although it is not as inexpensive as it sounds (a cyclical economy should trade on low valuations), it is not costly on a forward price/earnings ratio of ten. Although Brazil's economy is not immune to rising energy costsdiesel and fertilizer prices are risingthe country's high biofuel consumption should somewhat protect it. The Xtrackers MSCI Brazil ETF (LSE: XMBR) is something I may purchase.

Brazil stock index.

How about the losers?

The US dollar's decline as the world's reserve currency may be accelerated by the crisis. Given how deeply ingrained the dollar is in the global financial system, it is assumed that this will be a gradual process. However, we should keep in mind that, in the words of one of Ernest Hemingway's characters, ruin frequently occurs "gradually, then suddenly."

Apart from foolish political theatrics surrounding the absurd debt ceiling, I do not believe that America will default in any way, even if there are fewer foreign buyers of US Treasury bonds. But the decisions it may have to make in the future to stay out of bankruptcy most likely indicate either much slower growth or higher inflation.

More generally, it is currently difficult to predict the consequences of the US dollar losing its special status. A worldwide financial system might look very different if the dollarand consequently, many American businesseswere no longer the central component of so many transactions. I have Mastercard and Visa in my portfolio, so I'm curious about how susceptible they might be to future attempts to separate America from the rest of the world.