The upcoming Brazilian presidential election is in its final stages as the first-round vote approaches on Sunday. According to HSBC strategists led by Nicole Inui, recent polls indicate that socialist President Luiz Inácio Lula da Silva is slightly ahead of right-wing Senator Flávio Bolsonaro, with both candidates in a close race.
If no candidate secures more than 50% of valid votes, a runoff will take place on October 25. Inui stated in a note, “Brazil’s presidential elections are entering their final stretch with first-round elections to be held Sunday, 4 Oct.” The margin between the leading candidates is a key variable, with polls showing a narrow 5-point difference between Lula and Bolsonaro.
“A narrower lead for President Lula or a stronger performance by third-party candidates could impact policy change expectations and support a risk-on sentiment,” added Inui. Polymarket bettors favor Bolsonaro with a 60% chance of winning compared to 39% for Lula.
The market impact of the election is a significant focus for HSBC analysts. They highlight the potential outcomes and market reactions based on historical data. The initial market response following the first round could lead to a surge in the IBOV and a strengthening of the real against the dollar, as seen in previous elections.
Post-election results are expected to bring about asymmetric returns for equity markets, with different sectors poised to react differently based on the election outcome. The close race makes it essential to emphasize segments that can benefit from a relief rally without taking on excessive risk.
In conclusion, the Brazilian presidential race remains highly competitive, with uncertainty surrounding the outcome. Both candidates are neck and neck, making it challenging to predict the final result.