PRESENTING: The Hottest Stock Market In The World

Caracas Stock Exchange VenezuelaThe Caracas Stock Exchange

Photo: Oscar Sabetta/Getty Images

World markets just closed the first quarter of 2012. U.S. indexes have performed particularly well year-to-date, with the S&P 500 up 12 per cent.

But those gains pale in comparison to Venezuela’s IBVC Index on the Caracas Stock Exchange. Over the first quarter, the IBVC gained some 71.9 per cent, led by increases in stocks like Mercantil Servicios Financieros, Banco Provincial and Envases Venezola.

However, the country also suffers from blazing hot inflation.

“The evolution of President Chávez’s health continues to be the main uncertainty factor in Venezuela,” writes Bank of America economist Munir Jalil. “In an environment in which the boost to economic activity should persist thanks to significant increases in fiscal spending and inflation should remain in the 25-30% range – unless scarcities increase due to the law of costs and fair prices – attention will probably remain focused on the ongoing presidential campaign.”

Venezuela is obviously not without it’s problems. But it is a great example of how stocks can be a great hedge for inflation.

Below, the IBVC’s return year-to-date.

Chart

Photo: Bloomberg

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