Brazil stocks are set for a steep selloff after Luiz Inácio Lula da Silva won the October 25, 2026 runoff with 51.79% of the vote, beating Flávio Bolsonaro, who led most polls. The US-listed EWZ fund fell about 27% in pre-market trading, and dollar futures rose about 10% against the real. The Ibovespa closed Friday at 205,083. Our levels to watch are 196,791 and the pre-election area near 191,700. Data as of October 26, 2026, before B3 opened.
Markets had bet on a change of government in Brazil. Stocks and the real rallied for three weeks on that bet, and the result reversed it overnight. This post explains the election result, how markets reacted before trading opened in São Paulo, why investors worry about fiscal policy, and which Ibovespa levels matter now. You can follow wave counts for 96 markets in our live market analysis section.
Brazil election 2026 result: polls said Flávio, voters chose Lula
Lula won 51.79% of valid votes against 48.21% for Flávio Bolsonaro, with 99.99% of polling sections counted, according to Brazil’s Superior Electoral Court (TSE). The margin was 4,429,907 votes, or 3.6 points. The result was a surprise: the average of 45 runoff polls had Flávio ahead by 51% to 49%.
| Candidate | Poll average | Final result | Votes |
|---|---|---|---|
| Lula (PT) | 49.0% | 51.79% | 64.26 million |
| Flávio Bolsonaro (PL) | 51.0% | 48.21% | 59.83 million |
Lula starts his fourth term on January 5, 2027. He will face a tough Congress: the Liberal Party of the Bolsonaro family won 121 of 513 seats in the lower house, more than any other party. Reports also said Flávio Bolsonaro had not accepted the result. In 2022, his father took about 44 hours to accept defeat, and markets only calmed after he did.
How Brazilian markets reacted before the open
Trading in São Paulo starts at 10 a.m. local time, but offshore markets moved first. The EWZ exchange traded fund, which tracks large Brazilian companies, fell more than 27% in US pre-market trading on Monday. In Tokyo, an Ibovespa linked fund fell between 11% and 15% during the session.
| Market | Before the vote | After the result |
|---|---|---|
| EWZ (US-listed Brazil fund) | Rallied with Brazil stocks | About -27% pre-market |
| Ibovespa linked fund in Tokyo | N/A | -11% to -15% |
| US dollar vs Brazilian real | R$4.99 (Friday) | Futures up about 10% |
| Ibovespa | 205,083 (+0.47% Friday) | Opens Monday at 10 a.m. local time |
The Brazilian real had gained almost 5% against the dollar during the campaign, and the Ibovespa closed Friday almost 7% above its level before the first round, based on Friday’s closing data. Chris Turner of ING expected the dollar to open 5% to 7% higher, near R$5.20 to R$5.25. Luis Felipe Vital of Warren Investimentos expected interest rate futures to hit their daily limit after the open. B3 halts trading for 30 minutes if the Ibovespa falls 10% in a day, which would be near 184,575 points.
Why investors fear Lula’s fiscal plans
The selloff is about the budget. Brazil already pays one of the highest real interest rates in the world, with the Central Bank of Brazil’s Selic rate near 14%. Viktor Szabó of Aberdeen Investments said gross public debt is around 83% of GDP, more than 10 points higher than when this government took office.
- Slower cuts: Lula promised slower budget tightening than his rival, with cuts that spare lower income families. He also backed a shorter working week.
- Small surplus target: the 2027 budget bill aims for a primary surplus of 0.5% of GDP, but the real result could be close to 0.1% once court ordered payments are left out.
- Hard Congress: the opposition is large, so passing spending cuts or tax changes will take long deals with the centrist parties.
Alejo Czerwonko of UBS Global Wealth Management expects most of the rally after the first round to reverse, with weak sentiment until a clear fiscal plan appears. The first big test is the 2027 budget vote. Investors will also watch who Lula names as finance minister.
Ibovespa Elliott Wave levels
The Ibovespa rose from near 191,700 before the first round on October 4 to 205,083 on October 23, a gain of about 7%. We read that rally as a three-wave move (A, B, C) driven by election hopes, not the start of a new five-wave trend. Three-wave rallies built on one piece of news are often fully reversed when that news changes, and that is the setup now.
| Level | Ibovespa | Why it matters |
|---|---|---|
| Invalidation | 205,083 | Friday close. A daily close back above it cancels the bearish view |
| 50% retracement | 198,374 | Half of the election rally given back |
| Target 1 | 196,791 | 61.8% retracement of the rally |
| Target 2 | About 191,700 | Level before the first round. A full reversal of the rally |
| Circuit breaker | 184,575 | A 10% daily drop triggers a 30 minute halt on B3 |
What it means for US stocks and emerging markets
Wall Street ended last week mixed. On Friday, October 23, the Dow Jones Industrial Average fell 1.03% to 52,325.09, the S&P 500 slipped 0.21% to 7,647.37, and the Nasdaq Composite rose 0.17% to 26,054.20. A sharp drop in Brazil adds risk for emerging market funds, where Brazil is one of the larger weights, but its direct effect on US indexes is small. Big tech earnings and the Fed decision on October 28 matter more for US stocks this week. See our S&P 500 Elliott Wave analysis and the economic calendar for the week ahead.
Trade plan
- Bearish viewSell bounces in Brazilian stocks or EWZ while the Ibovespa stays below 205,083. Wait for the first hour to pass, since opening gaps on news days are very wide.
- Targets196,791, then the pre-election area near 191,700. Take some profit at the first target.
- BuyersWait. A clear fiscal plan or a market friendly finance minister would be the signal to look for a low near 198,000 to 191,700.
- RiskSize each trade so a stop costs only 1% to 2% of your account. Our position size calculator does the math.
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Frequently asked questions
Why are Brazilian stocks falling after the election?
Investors expected Flávio Bolsonaro to win and had pushed Brazilian stocks and the real higher. Lula’s win surprised markets, and investors worry that his government will be slower to cut the budget deficit.
Who won the Brazil election 2026?
Luiz Inácio Lula da Silva won the October 25, 2026 runoff with 51.79% of valid votes against 48.21% for Flávio Bolsonaro, a margin of about 4.43 million votes. He starts his fourth term on January 5, 2027.
What is the Ibovespa Elliott Wave target?
We read the rally after the first round as a three-wave move that news can reverse. The targets are 196,791, the 61.8% retracement, and the pre-election area near 191,700. A daily close above 205,083 would cancel the bearish view.
What happens to the Brazilian real after Lula’s win?
Dollar futures against the real rose about 10% in Sunday trading. ING expected the dollar to open 5% to 7% higher, near R$5.20 to R$5.25, from about R$4.99 on Friday.
Sources
- Tribunal Superior Eleitoral (TSE): official 2026 election results
- Banco Central do Brasil: Selic rate
This analysis is for education and is not financial advice. Elliott Wave counts are probabilities, not certainties. Read our risk disclaimer.
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