Published:
Brazilian stocks jump as Bolsonaro now seen as heavy favorite to win presidency
Brazil’s election run-off on Oct. 25 is being repriced after first-round results, with prediction markets and investors increasingly favouring Flávio Bolsonaro over incumbent Luiz Inácio Lula da Silva. Brazilian assets rose sharply and the article cites a fiscal-discipline narrative as a key market consideration.
CNBC reports that after Brazil’s first-round election results, a run-off between Luiz Inácio Lula da Silva and Flávio Bolsonaro is scheduled for Oct. 25. Neither candidate won an outright majority, but both advanced after placing first and second. The article says Bolsonaro is now viewed as the overwhelming favourite to win, with prediction-market odds rising materially after the first round.
CNBC links the repricing to how investors judge the final outcome. It notes that Kalshi odds for Bolsonaro moved to more than 80% from about 60% before the first-round results, and Polymarket odds rose to 85% from 63%. Brazilian assets reacted strongly: the iShares MSCI Brazil ETF rose by more than 12% on Monday, the Itau Unibanco shares cited were up 15%, Banco Bradesco up 19%, and the Bovespa index up 8%.
The piece also frames the macro channel investors are watching: Bolsonaro is viewed as more market-friendly largely because of a promise of greater fiscal discipline. It cites that in June Brazil’s deficit-to-GDP ratio was close to 10%. As the run-off approaches, FX traders should watch for how fiscal-policy expectations evolve and whether the odds shift on new information about the candidates’ proposed policy direction.
Why this matters for FX
A likely change in Brazil’s policy direction is being priced through election odds, which can alter expectations for fiscal discipline, sovereign risk and broader risk appetite. The immediate FX relevance is via capital flows and the risk premium investors demand on Brazilian assets: if markets see a more credible fiscal stance under Bolsonaro, it can reduce perceived sovereign stress and support the real and other high-yield/risk-linked currencies; if that view reverses, the opposite risk could emerge.