And the stock market loved it.
What happened on Sunday?
Brazilians voted in the first round of the presidential election. Polls had Lula ahead, but Flávio Bolsonaro, 45, son of ex-president Jair Bolsonaro, came first. Nobody reached 50%, so he faces Lula, 80, in a runoff on 25 October.
Jobs look great, but the economy is slowing down and Brazil pays a lot to borrow. Their answers to that are almost opposite.
| Candidate | First round | Party | Chance to win the runoff |
|---|---|---|---|
| Flávio Bolsonaro | 47.0% | Right-wing · Liberal Party (PL) | ~85% |
| Lula | 45.2% | Left-wing · Workers' Party (PT) | ~15% |
Brazil's economy today
| Unemployment | Inflation | Central bank rate | Debt / GDP |
|---|---|---|---|
| 5.3% | 4.2% | 13.75% | 82.5% |
Sources: TSE (votes) · IBGE and Banco Central do Brasil via Trading Economics (unemployment and inflation Aug, Selic Sep, debt Jul 2026) · Runoff chances: Polymarket betting odds (06.10.2026)
Two almost opposite plans
| Flávio Bolsonaro | Lula | |
|---|---|---|
| Spending | Big cuts, close at least 10 ministries | Keep current budget rules |
| Taxes | Roll back Lula's tax reform | No income tax under R$5,000 a month |
| Social | Keep Bolsa Família, add job training | Keep Bolsa Família, 40-hour work week |
| State | Sell state companies again | State-led investment |
| World | Close to Trump and the US | BRICS, good ties with China |
Economists say Flávio picks the right problems, but his plan still has no concrete numbers.
Sources: Forbes Brasil, Americas Quarterly, Reuters, The Rio Times
How did markets react?
Investors see Flávio as the more budget-friendly choice. On Monday, Brazilian assets had one of their best days in years.
| Stock moves on Monday 5 Oct | Change |
|---|---|
| B3 | +22.6% |
| Bradesco | +13.6% |
| Banco do Brasil | +11.0% |
| Itaú | +10.4% |
| Petrobras | +8.2% |
| Ibovespa | +7.7% |
- −4.6%: US dollar vs. real (central bank rate), now about R$4.99
- < 13%: 10-year bond yield, near a 1-year low
- +12.6%: MSCI Brazil ETF (EWZ) in US dollars
Losers: exporters like Suzano and Embraer. A stronger real means they earn fewer reais.
Sources: Trading Economics, Reuters, The Rio Times (closes of 05.10.2026)
What does this mean?
For Brazilians
Lula means more support for low incomes, but borrowing may stay expensive. Flávio promises lower interest rates and tougher policing, but with spending cuts in a weak economy.
For Brazil's market
A Flávio win helps banks and other rate-sensitive stocks the most. Exporters do better under Lula, because the real would likely weaken again.
For global markets
Flávio would move Brazil closer to the US, for example on critical minerals. China stays Brazil's biggest customer either way, and the EU–Mercosur deal has support on both sides.
Prepared by Marc Michel Prince · Investment Club Zurich
This publication was prepared by members of the Investment Club Zurich, a student association at ETH Zurich and the University of Zurich, for educational and informational purposes only. It does not constitute investment advice, nor an offer or solicitation to buy or sell any security or financial instrument. The views expressed are those of the author and do not necessarily reflect the views of ETH Zurich, the University of Zurich or any employer of club members. Market data is shown as of the date indicated and may have changed since. Past performance is not indicative of future results. Investing involves risk, including the possible loss of capital.