Lula da Silva’s victory in Brazil could keep Brazilian assets under pressure in the short term

Lale Akoner, Global Markets Strategist at etoro, on Lula da Silva’s election victory in Brazil

Lula da Silva’s victory could keep Brazilian assets under pressure in the short term

“Lula’s re-election could keep Brazilian stocks and the currency under pressure in the short term; however, this sharp sell-off could also create opportunities for investors. Markets had largely priced in a Bolsonaro victory; therefore, part of the reaction reflects a rapid repositioning by investors rather than a sudden deterioration of the Brazilian economy.

We expect volatility to persist, especially as concerns over public spending could keep financing costs elevated. Banks, the retail sector and companies that depend on the Brazilian consumer could come under pressure, while exporters generating revenue in US dollars could benefit from a weaker currency.

As for investors, we do not recommend rushing to buy the dips, but we would not write off Brazilian assets either. History shows that markets can recover quickly from political surprises once uncertainty clears. Strong companies with healthy finances could become attractive at lower prices, especially if Lula signals greater spending restraint. The key lies in distinguishing between companies facing structural challenges and those being sold simply because investors are nervous”.This communication is for information and educational purposes only and should not be construed as investment advice, a personal recommendation, or an offer or solicitation to buy or sell any financial instrument. This material has been prepared without taking into account the investment objectives or financial situation of any particular recipient, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any reference to the past or future performance of a financial instrument, index or packaged investment product is not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication. Cryptocurrency investments may not be suitable for retail investors and the entire capital invested could be lost. It is important to read and understand the risks of this investment, which are explained in detail at this link. Your capital is at risk