On Monday, Brazilian stocks rose following the first round of the presidential election, where Flávio Bolsonaro defeated incumbent President Luiz Inácio Lula da Silva by a bigger margin than expected. Bolsonaro is the son of former president Jair Bolsonaro.
On Monday, the iShares MSCI Brazil ETF (EWZ) climbed over 12%. U.S.-listed shares of Itau Unibanco added 15%, while Banco Bradesco jumped 19%. The country’s local Bovespa index rose 8%.
The First-Round Surprise
More than 47% of the votes were cast for Bolsonaro on Sunday’s first round. That beat Lula’s margin by a larger-than-expected gap, a margin that came close to 2. Pre-election polls had indicated Bolsonaro would fall behind Lula in the first count, though he remained the favorite to claim victory in a run-off.
When no one wins a majority in the opening round of voting for Brazil’s presidency, the top two finishers face off in a second round. The two candidates who have made it through to that decisive contest have now been determined, and the run-off itself is set for Oct. 25.
Odds Shift Sharply
Kalshi users now put Bolsonaro’s chances of winning the presidency at better than 80%, up from odds of about 60% before Sunday’s results were announced.
The odds for Bolsonaro on Polymarket have moved to 85%, up from 63% prior to the count of the first round. Kalshi and CNBC work together under a deal that covers customer acquisition alongside a minority investment.
Why Markets Like Bolsonaro
The general view among investors is that Bolsonaro is friendlier toward financial markets. His campaign promises include stricter budget controls, which set him apart from Lula’s past approach to spending.
In June, Brazil’s deficit-to-GDP ratio was almost 10%.
The Family Legacy
Flávio Bolsonaro took first place ahead of Lula, who is seeking a fourth term as president. Lula reclaimed the presidency in 2022, following a 12-year absence from office, having defeated the sitting president, Jair Bolsonaro.
Lula’s campaign has tried to tie Flávio Bolsonaro to his father’s efforts to contest his 2022 loss and brand the son as corrupt.
What Happens Next
Who takes office depends on the Oct. 25 run-off. Since Sunday, Bolsonaro’s chances have grown from roughly 60% to well over 80%.
| Platform | Bolsonaro’s Odds Before First Round | Bolsonaro’s Odds After First Round |
|---|---|---|
| Kalshi | ~60% | More than 80% |
| Polymarket | 63% | 85% |
The Market Reaction
Shares leapt straight away, and the rise was marked. The Bovespa gauge added 8%, while the stocks of individual banks gained still more.
The iShares MSCI Brazil ETF (EWZ) gained more than 12%, with Itau Unibanco and Banco Bradesco leading the way among the listed banks.
What Investors Are Pricing In
The prediction markets suggest investors are backing a Bolsonaro presidency, with Kalshi assigning him better than 80% odds and Polymarket placing his chances at 85%.
Sunday’s vote changed how people viewed the contest between Bolsonaro and Lula. Before the election, Bolsonaro was considered the slight favorite to win the first round. Yet his lead over Lula turned out to be smaller than what the polls had indicated.
The Road to October
The odds for Bolsonaro have changed since Sunday, and the stock market has moved in response.
There are still three weeks before the vote takes place. Bolsonaro’s route to the presidency has grown narrower, yet the result hangs in the balance until Oct. 25.
For now, investors are pricing in a Bolsonaro victory.
Source material: “Brazilian stocks jump as Bolsonaro now seen as heavy favorite to win presidency,” CNBC.
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