Brazil’s Stock Market Crashes After Lula’s Upset Victory
Brazil's stock market lost over $200 billion in value Monday after President Luiz Inácio Lula da Silva defeated Senator Flávio Bolsonaro in a runoff election.
The iShares MSCI Brazil ETF, a basket of Brazilian stocks trading in New York, fell as much as 26% from Friday's close of about $42.60, touching $31.40 before trimming losses to about 23% at $32.84 by mid-morning. The Ibovespa, Brazil's benchmark stock index, plummeted as much as 17% to about 170,000 points.
B3, the São Paulo exchange, triggered its first circuit breaker since the COVID-19 pandemic, halting trading for 30 minutes after the Ibovespa fell 10% from Friday's close. The automatic pause, meant to slow panic selling, couldn't prevent further declines when trading resumed.
Prediction markets misjudged
Investors had positioned for a Bolsonaro victory since he unexpectedly finished first in the October 4 first round with 47.03% of valid votes to Lula's 45.16%. The Ibovespa jumped 7.85% the next day on bets that Bolsonaro would tighten public finances and potentially lower interest rates. Monday's drop erased that rally and left the Ibovespa about 11% below its October 2 close.
Prediction markets significantly misjudged the outcome, with Polymarket giving Bolsonaro an 82% chance of winning the day before the vote and Kalshi having him near 80% on Sunday morning. Lula ultimately won 51.79% to 48.21%, a margin of about 4.4 million votes.
Political fallout
Bolsonaro rejected the result and vowed to seek its annulation, after previously pledging in August to respect the outcome. He objected to Supreme Court Justice Cristiano Zanin's decision to extend voting until 7 p.m. at Lula's campaign request, claiming the rules were changed midgame.
Related
