TL;DR
Flávio Bolsonaro is very likely to take the Brazilian presidency this Sunday (October 25).
The Brazilian market expects fiscal cuts and lower interest rates under his administration.
No presidential candidate in 37 years has lost a run-off after leading the first round.
The trade is before the weekend to front-run a potential multi-month macroeconomic uptrend in the Brazilian stock market.
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Catalyst and Rationale
This Sunday, October 25, 🇧🇷 Brazil is holding its presidential run-off.
The choice is between the 80-year-old leftist incumbent Luiz Inácio Lula da Silva (seeking his fourth career term) and the 45-year-old right-wing senator Flávio Bolsonaro (son of former President Jair Bolsonaro).
We’re not debating who is better for the country or the world.
From a cold, market perspective, a Lula win is considered bearish.
On the other hand, investors view a Bolsonaro administration as the fiscally prudent option that will pave the way for lower interest rates.
So the riff-raff can understand:
- Lula wins = 🐻 Bearish.
- Bolsonaro wins = 🐮 Bullish.
During the first round on October 4, pollsters expected Lula to edge ahead, but Bolsonaro outperformed to finish 1.87% above the incumbent.
So, even when polls only give Bolsonaro a razor-thin 51% to 49% advantage, experts know that most of the wandering votes from the eliminated third-party candidates are bound to lean towards Bolsonaro.
That’s why prediction markets give Bolsonaro a 77% chance of winning.
History backs him up. You see, since Brazil returned to democracy in 1989, the first-round runner-up has never won the run-off.
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Following the Smart Money
The market already showed how it can react if Bolsonaro secures the win.
The Monday following his first-round upset:
- The Brazilian Real surged 3% against the U.S. dollar at the open.
- Interest rate expectations shifted from a flat 13.75% Selic rate through 2027 to a significant 150-basis-point drop to 12.25%.
- Their Ibovespa index ripped +9.1% intraday, which is the biggest move since April 2020.
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Tickers
I went through all the Brazilian tickers that jumped after the first-round results, and then handpicked the ones where analysts are already bullish, regardless of the election’s outcome.
Here’s what I have:
$XP: This one has a $16.3 billion market cap. It is the Charles Schwab of Brazil but with the tech-forward, retail-trader energy of Robinhood.
My cost basis is $29.23 (bought on Oct 16).
Small-Caps
Careful. The pair below are small-caps and have a wilder temper.
Don’t touch these unless you know how to handle increased volatility.
$PICS: $1.8 billion small-cap. It operates like the Brazilian equivalent of Venmo, but scaled into a full digital bank like Cash App or SoFi.
My cost basis is $13.17 (bought on Oct 16).
$AGBK: $1.2 billion small-cap. Think of it as a Brazilian SoFi with a specialized lending model that is driven by AI-automated risk management, similar to Upstart.
My cost basis is $7.19 (bought on Oct 16).
The Broad Approach
$EWZ: The iShares MSCI Brazil ETF. This is the simplest way to capture targeted exposure to Brazilian companies and ride this potential macro trend.
My cost basis is $41.83 (bought on Oct 16).
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Trade Blueprint
You could wait until the election results are known. Brazil uses electronic voting machines, which means they will likely be able to declare a winner on Sunday night. But you wouldn’t be in this subreddit, then.
The trade is simple. Bolsonaro wins, you hold and ride.
If Luiz Inácio Lula d