Brazil Stocks Plunge 26% as Lula’s Victory Shocks Markets, Real Tumbles

Brazil’s financial markets reeled on Monday after Luiz Inácio Lula da Silva defeated incumbent Jair Bolsonaro in a runoff election that defied prediction markets, which had priced in an 80% chance of a Bolsonaro win. The iShares MSCI Brazil ETF (EWZ) plunged as much as 26% in early trading, while the Brazilian real weakened sharply, with the U.S. dollar jumping as much as 12% against the currency. The selloff reflects investor fears that Lula’s leftist economic agenda—including higher social spending and a more interventionist state—could undermine fiscal discipline and slow market-friendly reforms. Bolsonaro’s loss also removes a leader seen by many investors as pro-business, despite his controversial tenure. The sharp move underscores how Brazilian assets remain highly sensitive to political shifts, with foreign capital quick to exit on perceived policy risk. As Lula prepares to take office in January, markets will watch closely for signals on cabinet appointments and fiscal policy, with volatility likely to persist until his economic team’s direction becomes clear.