Companies listed on B3, Brazil's stock exchange in Sao Paulo, have lost R$ 873 billion (roughly US$ 162 billion) in combined market value between the presidential runoff vote and this Thursday (29), according to a survey by consultancy Elos Ayata reported by CNN Brasil. Over the same period, the benchmark Ibovespa index has fallen about 16%. In Monday's session alone (26), the first trading day after Luiz Inácio Lula da Silva's reelection was confirmed, the index plunged nearly 14% and triggered a circuit breaker, the mechanism that halts trading during steep declines.
The repricing started at research desks. Citigroup and BCA Research downgraded their recommendations on Brazilian assets, arguing that the risk-return profile of stocks, bonds and the currency has deteriorated. BCA pointed to rising default risks, weaker growth prospects and inflationary pressure from a weaker real. Moody's assessed that Lula's reelection is likely to keep the current fiscal trajectory, with prolonged nominal deficits, high financing costs and growing debt charges. In the rates market, futures contracts jumped more than 250 basis points in some maturities on Monday, and the interbank rate for January 2028 was trading at 14.43% on Thursday morning, according to CNN Brasil. The Central Bank, which holds its benchmark Selic rate at 13.75% a year, meets next week under added pressure: BTG bank raised its 2027 inflation forecast from 4.8% to 5.9%, shrinking bets that the rate-cutting cycle will continue.
Where the losses hit hardest
A tally by Brazil Journal shows the damage was uneven. Between Friday (23) and Tuesday (27) alone, the exchange had already shed R$ 662 billion in market value. Since Sunday (25), the real estate index (IMOB) leads the losses, down 33.6%, followed by small caps, off 30%, the consumer index (ICON), down 28.5%, and the financial index (IFNC), down 26.3%. Among individual stocks, rental truck company Vamos, part of the Simpar group, lost 60% of its market value since the election. Retailer Magazine Luiza fell 59%, energy group Cosan dropped 55% and health insurer Hapvida lost 52%. On Thursday, the Ibovespa fell a further 2.68%, with Casas Bahia shares plunging 20% in a single session.
The rout spread to the fund industry. A profitability survey seen by CNN Money analyst Lucinda Pinto shows losses of up to 21% among the multimarket funds sampled, and strategies with heavy long exposure to stocks lost more than 40% in a single day. Managers interviewed by Brazil Journal said some funds were leveraged on a bet that Flávio Bolsonaro would win the presidency and may now need to sell holdings to meet redemptions, which could fuel a second wave of selling. "The market bet on a Flávio Bolsonaro victory. Lula won. Whoever paid dearly for a 70% probability found out that 30% also happens," wrote Giuliano Ajeje, a former UBS-BB analyst, on LinkedIn.
One manager heard by Brazil Journal added a political factor to the bill. In his view, the market has started pricing in the risk of US retaliation after Flávio Bolsonaro left Brazil and published a letter declaring himself the "true president-elect." A possible application of the Magnitsky Act, the US sanctions law, would hit banks hardest, he assessed.
For companies, the bill arrives through the cost of capital: falling share prices make new equity issues more expensive, and higher benchmark rates raise the price of rolling over debt and financing investment, which tends to delay hiring and expansion. For consumers, the effect shows up later but points the same way. If the Central Bank's rate-setting committee halts the Selic cutting cycle, credit, from credit card revolving balances to mortgages, is likely to stay expensive for longer.