Remember the Brazil trade? It's back. And this time, it's actually working.

Brazilian equities are roaring in early 2026, catching a tailwind from rising commodity prices, a weakening U.S. dollar, and a genuine rotation into emerging markets. The iShares MSCI Brazil ETF (EWZ) is up roughly 20% month-to-date, absolutely demolishing the SPDR S&P 500 ETF Trust (SPY), which has gained just under 3% over the same stretch.

That 17-percentage-point spread marks EWZ's strongest one-month outperformance versus U.S. equities in more than four years. For context, Brazilian stocks have spent much of the past decade disappointing investors who kept waiting for the commodity supercycle to return. Now it looks like the wait might finally be over.

According to CountryETFTracker data, EWZ currently ranks as the third best performing U.S.-listed country ETF over the past month. Only the iShares MSCI Peru and Global Exposure ETF (EPU), up 26%, and the iShares MSCI South Korea ETF (EWY) have done better.

The technical picture is also turning heads. The EWZ/SPY relative spread has broken above its longer-term downtrend, signaling a potential breakout that could pull more capital into Brazilian equities after decades of underperformance. And if history is any guide, there's room to run. During the last major commodity supercycle from October 2002 to May 2008, Brazilian equities outpaced the S&P 500 by over 1,000%, showcasing their leverage to resource-driven bull markets.

Why Analysts Think This Rally Has Legs

On Tuesday, Brazilian macro analyst Otavio Tavi Costa, CEO at Azuria Capital, wrote in a post on X about Petroleo Brasileiro SA (PBR), Brazil's largest energy company: "Brazil's largest energy company is on the verge of a major breakout. If you don't see the connection to the recent breakdown in the US dollar, I can't help you. Game on."

According to Costa, Brazil's market breakout is part of a much larger shift underway in global markets. Last week, he highlighted that Brazilian equities are breaking above long-term historical resistance, a move many investors still see as isolated. In his view, that interpretation misses the bigger picture: resource-rich emerging markets have historically moved in lockstep with commodity cycles.

If the current surge in hard assets marks the early stages of a broader rotation, Costa argues, economies like Brazil stand to benefit disproportionately. This could signal the start of a longer-term structural trend rather than a short-lived trade.

The Commodity Connection and Dollar Weakness

Analysts at 22V Research, including Jordi Visser, head of AI Macro Nexus Research, and derivatives specialist Jeff Jacobson, are also bullish on Brazil's prospects. In a note shared earlier this week, 22V Research said it prefers emerging markets such as Brazil and the broad-based emerging-market ETF to play what it calls the "broadening out" theme, driven primarily by commodities and materials sectors.

The research group also highlights continued U.S. dollar weakness as a catalyst that should help these markets outperform. A weaker dollar tends to benefit commodities and emerging-market assets priced in dollars, as it raises local currency returns for foreign investors.

Visser argues there is still considerable upside in EWZ despite its recent run. He notes that Brazil's sector composition aligns well with his favored themes. "If you look at EWZ's composition, you're getting exposure to exactly the sectors we're most bullish on — materials, energy and, to a degree, banks," Visser said.

That positioning has helped EWZ lag global markets for years, but now appears to be working in its favor as capital rotates into non-tech, real-asset-linked trades.

Visser also noted that Brazil has been structurally underowned and underperforming for an extended period, a setup that can fuel powerful momentum once flows reverse. "We're starting to see the money gravitate toward it," he said. "And when that happens — as we've seen in other trades like silver — buying tends to beget more buying."

In other words, Brazil might not just be having a moment. It might be having a multi-year moment. And after decades of false starts and dashed hopes, that would be something.