Wall Street Braces for Two Wildly Different Brazil Election Outcomes

CNBC··BRUS·Read original
3▲1 ▼1Impact / 5
Summary · why it matters

With the first round of Brazil's presidential election taking place Sunday, Wall Street is gearing up with starkly different market predictions depending on the outcome of the neck-and-neck race between 80-year-old leftist Luiz Inacio Lula da Silva and 45-year-old right-winger Flavio Bolsonaro. In short, if Bolsonaro wins, Wall Street expects a rally in the country's bonds, currency and stocks. Kalshi markets now show Bolsonaro favored to win 60% to Lula's 39%, though prediction markets are prohibited in Brazil and may not reflect local sentiment. JPMorgan analysts say that if Brazil enters another period of reform, interest rates could decline to their neutral level, 6% in real terms and 10% in nominal terms, and they would be thinking about MSCI Brazil upside potential between 21% and 41%, with the forward P/E moving from a current 8.6 to as high as 13.3. JPMorgan also calls the currency outcome bimodal, with USD/BRL moving to 5.50 if Lula wins and 4.90 if Bolsonaro wins.

Impact on assets 4

Digital Finance & Tokenization▲ · 2 stocks
JPMorgan Chase & Co
JPM
± MixedMonetaryrelevance

JPMorgan analysts forecast Brazil rate cuts and MSCI Brazil upside depending on election outcome, but no direct impact on JPMorgan itself.

Financials▲ · 1 stocks
MSCI Inc
MSCI
▲ PositiveCapitalrelevance

JPMorgan sees MSCI Brazil upside of 21%-41% if Bolsonaro wins and reforms continue, benefiting MSCI Inc's index business.

Others▼ · 1 stocks
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