Brazilian assets are set to surge after Senator Flávio Bolsonaro led President Luiz Inácio Lula da Silva in the first round of elections with 47% of the vote to Lula’s 45%, exceeding investor expectations. Fabrício Taschetto of Ace Capital forecasts the real strengthening 3% and stocks gaining over twice that. Retailers, homebuilders, shopping-mall operators, and consumer and apparel companies are expected to lead the rally, per Felipe Arslan of Morada Capital.
Cathy Hepworth of PGIM, managing $1.5 trillion, said Bolsonaro’s lead makes a second-round win likely, predicting strong performance for the real and interest rates. Early market signals showed a Brazil-tracking ETF in Japan up over 11% and CME currency derivatives indicating a strong day for the real. Investors view Bolsonaro as more likely to pursue fiscal adjustment, which JPMorgan estimates could drive the real up 6%, lower bond yields toward 13%, and lift equities by as much as 50%.
Conversely, fiscal weakness could weaken the currency similarly, push yields to 15.5%, and cut stocks by 21%. Persevera Asset Management’s Guilherme Abbud noted the strong showing by right-wing candidates in gubernatorial, congressional, and senatorial races added to market optimism. The CEO of Persevera, overseeing 4.8 billion reais ($921 million), said governability and economic conditions are now highly favorable, with potential for a multi-day rally.
Bolsonaro, son of former President Jair Bolsonaro, gained traction as Lula faced scandals and economic slowdown, despite early investor skepticism over his ties to disgraced banker Daniel Vorcaro. The Ibovespa had already risen 5% in dollar terms in September, reflecting growing confidence in a market-friendly outcome.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing