Ibovespa has the worst week since March 2020 after Lula's re-election and the dollar soars 9%

The Ibovespa ended Friday (30) down 0.75%, at 167,921.80 points, and closed the week with a decline of 18.12%, the worst weekly performance since March 2020, according to Times Brasil. In the same period, the spot dollar rose 9.04% and ended at R$5.4443, after rising 1.05% on Friday alone. The reaction marks an intense movement in the markets in light of the result of the presidential election.

Lula (PT) was re-elected in the second round, held on Sunday (25), with 51.79% of valid votes against 48.21% for Flávio Bolsonaro (PL). According to Money Times, the difference exceeded 4.3 million votes. The result led to a simultaneous repricing of the stock exchange, exchange rate and future interest curve, according to the same publication.

October's performance helps size up the shock. According to the Money Times survey, the Ibovespa accumulated a drop of 9.88% in the month, the biggest monthly drop since June 2022, while the spot dollar advanced 5.20% and the PTAX rose 4.65%, the best result among investments in the period. X-Trader News highlighted that the weekly increase in the American currency was the biggest since 2008. In the year to date, however, the dollar still appears with a decline of 0.81%, according to Times Brasil.

Times Brasil attributes the drop to three combined factors: Lula's re-election, concern about public accounts and the lack of definition regarding the economic team. For a market that seeks signals about the fiscal direction, the absence of defined names in the economic area tends to weigh on asset pricing.

The effect also reached other markets. According to X-Trader News, the Nasdaq future fell 3.50% and gold was below US$4,000 at the time of coverage, which indicates that risk aversion was not restricted to Brazil.

What changes for the investor

For those who operate stock markets, exchange rates and interest rates, the scenario changes the risk reading. With the dollar rising and the interest curve repriced, companies with debt in foreign currency or dependent on imported inputs tend to feel the impact more, while exporters tend to benefit from a stronger currency. Stocks linked to domestic consumption and sectors sensitive to the cost of money may also see additional volatility. The next signals from the economic team regarding fiscal policy should be one of the points most closely watched by the market. This text is a scenario analysis and does not constitute a purchase or sale recommendation, nor a price projection.

Automatically translated from Portuguese.