Market Trends | Big-league Brazil

An investment-grade rating from Standard & Poor's on April 30 sent Brazil's market soaring, as the upgrade lowers the nation's borrowing costs and widens its investor base.

"The move to investment grade is a lasting positive for Brazil," says Merrill Lynch economist Felipe Illanes.

It could lead to a stronger currency, lower interest rates and credit growth, which should boost domestic consumption.

This could lift banks, homebuilders and producers of consumer goods. Merrill Lynch rates the market "overweight." Brazil's stock index, the Bovespa, closed above 70,000 for the first time recently.

Citi Investment Research strategist Geoffrey Dennis says it could rise to 74,000 by year-end, though it may dip in the interim.

The country has come a long way since defaulting on its debt in the 1980s, benefiting from the commodities boom.

To be sure, it still has risks. Inflation has been rising and Brazilian stocks now trade at 12.4 times expected earnings, above their historical average valuation of 8.7, Dennis says.