As speculation about the Federal Reserve’s quantitative easing exit strategy mounts, investors around the world are pondering what to do when the era of easy money ends. Brazilian managers have already had a taste, and they know it’s no picnic.

Brazil’s markets produced some of the world’s best returns during the past decade, but they have been hit by a triple whammy in recent months. Continued sluggishness in the economy, which grew by just 1.9 percent from a year earlier in the first quarter, has depressed the once-high-­flying stock market. Interest rates have been climbing since Banco Central do ­Brasil responded to rising inflation by hiking its key policy rate by a total of 75 basis points in April and May to 8 percent. And as if markets needed more bad news, demonstrations against bus fare hikes in Rio de Janeiro and São Paulo have spiraled into a nationwide protest movement against corruption and heavy spending on the 2014 World Cup and 2016 Summer Olympics, raising questions about the country’s political stability.

“The Brazilian government is in a very tough spot, dealing with two large sources of pressure that could ultimately demand very different styles of reaction,” says Marcelo ­Salomon, co-head of Latin America economics and strategy at Barclays in New York. “On one side there is social unrest demanding better use of public money. On the other, Brazilian financial asset prices are in a tailspin that we believe has been amplified by the social unrest, though it has its roots in the lack of fiscal control that has put Brazil on the route to sovereign credit downgrades.”

The domestic turmoil, coming at a time when global investors have been fleeing emerging markets generally because of rising interest rates in the U.S., has hit Brazilian markets hard. The Ibovespa Index stood at 47,441.33 in late June, down 22.2 percent since the end of last year. The local yield curve has sold off massively, with one-year swap rates climbing by almost 200 basis points since the beginning of May to 9.89 percent at the end of June, according to Barclays. The real fell by 9.3 percent against the dollar in May and June.

The harsh environment presents a tough challenge for the Brazil 20, Institutional ­Investor’s exclusive annual ranking of the country’s largest money managers.