Wall Street Sees Brazil Assets Swing 21%-41% as Bolsonaro Opens 60%-39% Edge Over Lula
Updated
Updated · CNBC · Oct 3
Wall Street Sees Brazil Assets Swing 21%-41% as Bolsonaro Opens 60%-39% Edge Over Lula
3 articles · Updated · CNBC · Oct 3
Summary
JPMorgan says a Bolsonaro victory could lift MSCI Brazil by 21% to 41%, while a Lula win could send USD/BRL to 5.50 instead of 4.90 under Bolsonaro.
Kalshi pricing now favors Bolsonaro 60% to Lula's 39%, and JPMorgan says the MSCI Brazil has risen 0.25% on average on days his poll numbers improved.
Markets prefer Bolsonaro because he is promising fiscal discipline in an economy where debt-to-GDP has climbed to 81.9% and Citi estimates Brazil needs a 3% to 3.5% permanent fiscal adjustment.
That adjustment would be politically hard: about 90% of Brazil's budget is mandatory, Brazil's tax burden is already 32%—Latin America's highest—and congressional races Sunday will shape any reform agenda.
JPMorgan points to Jair Bolsonaro's 2016-2020 reform period, when 2-year yields fell near 4.7% and equities gained 130%, as the template investors hope could repeat.