After Lula's victory, Ibovespa falls almost 14% and Ellery points to a risk for public accounts

The victory of Lula, who won his fourth term on Sunday, the 25th, was followed by a strong market reaction. According to O Antagonista, which echoes a text by Roberto Ellery published in Crusoé, B3 activated the circuit breaker at the beginning of Monday's trading session.

The drop was widespread. According to O Antagonista, the Ibovespa fell almost 14% on the day, and the big banks also retreated. The dollar reached R$5.60, an increase of 12%, but closed the day at R$5.40.

According to Ellery, the market expected a better scenario with Flávio's victory. He recalls that Flávio's campaign had promised a strong increase in spending, a point that weighs heavily on the debate over public accounts.

For the author of the text, the problem comes from before. Ellery assesses that there was neglect with public accounts in Lula's third term.

Ellery also assesses that convincing the population and politicians of a fiscal adjustment will be difficult after the promises and spending made in the campaign. In his view, the task tends to be more complicated than it seems.

Regarding the fourth term, Ellery says that it is still too early to answer the questions that the moment raises. For now, investors will have to follow the first signs of the new government.

What changes for the investor

The episode shows that Brazilian asset prices reacted quickly to the prospect of more public spending, according to O Antagonista. For those who follow Ibovespa, banks and the dollar, it is worth observing how the government positions itself on the accounts in the coming weeks, as fiscal discipline has become the central point of market reading. This article does not provide a purchase or sale recommendation, nor price projections.

Automatically translated from Portuguese.