Diamonds and Dogs

10/3/18

Festival in Brazil. The Brazilian stock market (EWZ) is up 4% today and up 19% in the last month ahead of their Presidential election. Polls are showing the far-right presidential candidate ( And market friendly candidate) Jair Bolsonaro is gaining ground among voters. The markets have supported Bolsonaro partly due to the presidential candidate's appointment of Paulo Guedes, a University of Chicago-trained financier, as his "one-stop shop" on economic policy. Investors believe Guedes is the best hope of a revival of further reforms, which have stalled in recent years.

Acuity Brands (AYI) facing higher costs thanks to, you guessed it, higher tariff costs. The lighting and building management company is down 13% following earnings. The earnings and sales actually beat expectations, but costs of products sold rose  17.8% to $648.9 million and operating margins decreased 3.9 percentage points. The company said costs were "well higher" for items such as electronic components, freight, wages, and certain commodity-related items, such as steel. "Many of these input costs experienced dramatic increases in price in the fourth quarter due to several economic factors, including previously announced and enacted tariffs and wage inflation due to the tight labor market."