Key facts
- Brazil's presidential election will go to a runoff on October 30.
- Incumbent President Jair Bolsonaro secured 47% of the vote in the first round.
- Former President Luiz Inácio Lula da Silva received 45% of the vote.
- Neither candidate achieved the 50% threshold for an outright victory.
- Right-wing and center-right candidates won the largest states in the first round, including São Paulo and Minas Gerais.
Brazil's presidential election will proceed to a runoff on October 30, as neither incumbent right-wing President Jair Bolsonaro nor former left-wing President Luiz Inácio Lula da Silva secured the necessary 50% of the vote in the first round. Bolsonaro garnered 47% of the ballots, while Lula received 45%, indicating a deeply divided electorate.
Financial markets reacted positively to Bolsonaro's lead, with analysts anticipating a strong rally across Brazilian assets. Portfolio managers like Thierry Larose at Vontobel expect the market to give Bolsonaro the benefit of the doubt regarding fiscal responsibility, anticipating rapid announcements about fiscal adjustments. Viktor Szabo from Aberdeen noted expectations of a 4-5% move in FX and a 7-8% rise in equities, along with a strong rally in local rates due to expectations of a more aggressive central bank cutting cycle.
However, caution was advised by Jeff Grills of Aegon Asset Management, who highlighted the difficulty in predicting voter intentions and the potential for fiscal constraints if Bolsonaro wins. Graham Stock of RBC BlueBay stated that Bolsonaro is the clear favorite for the runoff, with a strong showing for his party in congressional and state races, though Congress is still unlikely to be fiscally conservative. Thomas Haugaard at Janus Henderson Investors sees a strong potential for Brazil to stabilize its credit rating with a Bolsonaro win, contingent on policy execution.
Gustavo Medeiros of Ashmore Group noted that while the runoff is not a foregone conclusion, the arithmetic heavily favors Flávio Bolsonaro. He also pointed out that a Flávio presidency would inherit a divided country and that parts of the elite remain concerned about democratic institutions.