Biggest daily drop in modern history brings down the Stock Exchange, and Bradesco BBI urges caution

The Brazilian Stock Exchange recorded, according to InfoMoney, the biggest daily drop in the modern history of the national market. The MSCI Brazil, measured in dollars, fell 18.7% after the elections, and the fall surpassed in intensity the 2008 crisis, the Covid-19 shock and the 2017 political crisis, caused by the recordings involving Michel Temer.

For Bradesco BBI, the damage may not be over. The bank's strategists estimate that the decline that began after the second round has not yet ended, which makes it difficult to say that the worst is behind us.

The bank recognizes that Brazilian shares are at a significant discount, but recommends caution. The distinction is central: being cheap does not mean that the fall is over, and those who confuse the two things tend to underestimate the time needed for a reaction.

According to Bradesco BBI strategists, recoveries after shocks of this size usually take months and, in some cases, years. This reading removes the expectation of a quick rebound and refocuses on the term of each investment.

For those who defend fiscal responsibility and a free market environment, the episode shows the weight that the perception of risk has on asset prices. When confidence deteriorates abruptly, the return of risk appetite depends on clear and lasting signals, not just a lower price.

What changes for the investor

In practice, the scenario calls for more attention to the time horizon than to the movement of a day. If recovery can take months or years, volatility should remain high while the market seeks a new balance, and the investor needs to assess whether his deadline and tolerance to fluctuations accommodate this period. This article does not provide a purchase or sale recommendation and does not provide quotations.

Automatically translated from Portuguese.