A surprise result Sunday would generate upside risk for Brazilian stocks The Brazilian presidential election takes place this Sunday and it’s on a knife edge. Polls show the incumbent Lula da Silva with a narrow lead over Flavio Bolsonaro but well within the 5% margin of error. One specialist emerging market fund manager thinks the vote presents an asymmetric risk profile: a win for Lula may be greeted with a modest decline of a few percent in stocks but a win for the challenger, Bolsonaro, would be greeted with a sharp rally, perhaps as much as 10%.
Sunday’s ballot is a near-repeat of the 2022 election when Lula won a third term in a contest against Bolsonaro’s father, Jair, and hot-button issues for voters focus on many of the same themes in terms of both style and policy this time round. Interestingly, U.S. prediction markets Kalshi and Polymarket, both of which are banned in Brazil, indicate victory for Bolsonaro by a wide margin of around 15 percentage points. Don’t Short Yourself offers weekly money tips to help you earn it, stack it and grow it.
I would like to receive updates and special offers from Dow Jones and affiliates. I can unsubscribe at any time. If no single candidate bags the 50% of the vote required for outright victory then a run-off between Lula and Bolsonaro, excluding fringe candidates, takes place Oct. 25.
This might be enough to prompt a surge in stocks as commentators predict Bolsonaro may scoop up some of those floating voters in a second ballot. In an interview with MarketWatch Thursday, specialist emerging market fund manager Malcolm Dorson discussed the potential outcomes of Sunday’s ballot and the opportunities it presents to investors. Dorson is the head of the active investment team and a senior portfolio manager for Global X exchange-traded funds.
As the fund manager for the Global X Brazil Active ETF , Dorson is well-positioned to assess the prospects for the Bovespa benchmark index. So far in 2026, Brazilian equities have delivered a 16% return while the real’s appreciation against the dollar has added another 5% to that for international investors. However, Bovespa has still underperformed the broader emerging markets index which has increased by almost 19%, partly because of its heavy weightings of technology and semiconductor stocks that aren’t available in Brazil.
Brazil’s index is dominated by commodity plays and major banks with a relative dearth of technology exposure. This may explain why emerging-market investors are generally underweight Brazilian stocks within the MSCI benchmark. Brazil should make up 4% of a neutral portfolio but Dorson believes most specialist emerging-market funds own far less than that.
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