Brazilian domestic equities and financial assets suffered steep declines across Monday’s trading session following incumbent President Luiz Inacio Lula da Silva’s runoff election victory over Flavio Bolsonaro. The benchmark Ibovespa index slid sharply from Friday’s closing level of 205,083 points, while the Tokyo-traded iShares MSCI Brazil ETF posted a nearly 15% drop, marking its largest single-day selloff since 2008 as foreign capital exited positions that had priced in a conservative administration.
Turns out the prediction markets completely misread the Brazilian election winner.
80%+ odds of Bolsonaro winning for weeks!
Are the prediction markets misreading the US midterms as well? pic.twitter.com/Oi3J5SZom4
— Nic (@puckrin) October 26, 2026
MORGAN STANLEY WARNS OF BRAZIL MARKET SELLOFF
Morgan Stanley forecasts a 20%–30% drop in Brazilian equities following Lula's election victory.
The bank sees USD/BRL reaching 5.60, potentially 6.00 if fiscal concerns worsen, alongside 300–400 bps of pressure on interbank rates.…
— *Walter Bloomberg (@DeItaone) October 26, 2026
🇧🇷 Wall Street woke up to Lula’s win and dumped Brazil nearly 20% overnight.
The iShares MSCI Brazil ETF, the main way U.S. investors bet on the country, sank from $42.59 at Friday’s close to around $34 in overnight trading.
That’s roughly 19% gone in a single night, before… pic.twitter.com/VcJYyJyvNp
— Mario Nawfal (@MarioNawfal) October 26, 2026
Lula’s surprise reelection over Flávio Bolsonaro triggers a sharp sell-off in Brazilian assets. Markets had priced in a Bolsonaro win and reforms, now they reprice fiscal risks. Real futures weaken ~10%, EWZ and ADRs gap down hard in US pre-market. @LulaOficial @FlavioBolsonaro pic.twitter.com/7TS0dhrjoe
— Antonio Costa (@ACInvestorBlog) October 26, 2026
Has Brazil converted to communism??
What is -26% overnight?? Insane. pic.twitter.com/ZbpPUppJTG
— Oguz Erkan (@oguzerkan) October 26, 2026
The post-election asset repricing follows weeks of equity surges triggered by first-round political expectations. On October 5, 2026, the Bovespa benchmark surged roughly 7.7% in a single session after right-leaning candidates secured significant legislative leads, setting up Monday’s sharp market unwind as institutional portfolios recalibrated for extended Workers’ Party governance and public sector spending frameworks.
https://tradingeconomics.com/brazil/stock-market
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