Market prices Brazil's election outcome before votes are cast, risking reversal.

The Ibovespa closed Friday at 209,066 points — a new intraday record — with the dollar firmly below R$5, and the logic behind this move reveals a tension that may define the next chapter of the Brazilian economy: the market is pricing in a change of government before it actually happens, and economists are already warning that the euphoria has an expiration date.

Asset reaction to the first-round election result was swift and sweeping. Flávio Bolsonaro's (PL) lead over President Lula (PT) in the polls fueled a buying rush that pushed the Ibovespa up 7.7% in the first trading session after the first round, breaking through the 200,000-point barrier for the first time. On Friday, a new Datafolha poll confirming the PL candidate's lead sustained the rally, with future interest rates retreating sharply in parallel. The market's message is clear: a potential opposition victory would be read as the return of a fiscal austerity agenda. The problem, as economists heard by Folha de S.Paulo point out, is that the math of the adjustment has not yet been presented with enough precision to justify such anticipation.

Flávio's economic campaign coordinator, Daniella Marques, tried to calibrate expectations on Saturday, stating that eventual cuts will fall on "Brasília perks" — advisors, cars, flights — and not on social programs. On the other side, Lula publicly questioned where the R$200 billion in cuts promised by his opponent would come from, reiterating that opposition governments "always cut from the poor." The narrative dispute around fiscal policy is now the main driver of Brazilian assets, and Valor Econômico summarized the dilemma precisely by laying out two radically different scenarios for NTN-Bs: 5.5% in the case of a credible adjustment, or 9% should the adjustment fail to materialize. The distance between these two numbers is the distance between a sustained recovery and a painful reversal.

This uncertainty takes hold at a moment when fundamentals were already deteriorating independently of the electoral calendar. September's IPCA rose 0.82% — above projections and above the inflation target ceiling — pulled mainly by rising electricity costs. The energy pressure is not trivial: it runs through the entire productive chain, driving up prices from the French roll, whose cost has an energy component of nearly 30%, to major infrastructure projects. Airlines, already strangled by expensive fuel, sounded the alarm about a grim operational winter, with route reductions, deferred aircraft lease payments, and cost cuts that are already affecting available capacity. The government responded by announcing the zeroing of the federal tax on gasoline and the renewal of the ethanol subsidy, in addition to an exclusive subsidy for diesel imports — measures with a cost of R$5.2 billion announced 16 days before the second round, which did not go unnoticed by the opposition or by fiscal analysts.

Simultaneously, household consumption, the engine that sustained Brazilian growth in recent years, is losing traction. Economists consulted by Folha project the smallest consumption growth since the pandemic, both in 2026 and 2027. CNC's Peic data reinforces this reading with a worrying nuance: delinquency fell in September, but income commitment to debt increased — Brazilians are paying, but they are more squeezed. UNCTAD projects GDP deceleration to 1.8% in 2026 and 1.5% in 2027, after 2.3% in 2025, on a trajectory that presupposes precisely this loss of momentum in domestic consumption.

Amid the electoral and macroeconomic fog, foreign capital flows into Brazil in strategic sectors remain notable. At least 18 foreign companies now account for more than R$17 billion in investments in rare earths and critical minerals in the country, with Australia's Lynas leading the most recent episode by announcing the acquisition of Meteoric Resources for R$3.5 billion to operate in southern Minas Gerais. The election, according to specialists, will also reshape the commercial relationship with the United States — Flávio would signal greater alignment with Washington, including around critical minerals, while Lula tends to preserve a multilateral posture. For the global investor, who according to Arko Advice is already showing growing appetite for Brazil in infrastructure, data centers, and mining, the definition of the next government is a central variable in the equation.

In the sports betting sector, the unwinding of the ban decreed by the Lula government in September is advancing to its settlement phase: R$159 million still needs to be returned to bettors, with 8 companies yet to transmit the necessary data to banks. The Finance Ministry, in parallel, is investigating 14 betting operators for revenue underreporting — Blaze alone may have caused a R$96 million loss to public coffers. The sector's crisis has direct reverberations in Brazilian football, which lost significant revenue with the ban and is now seeking new liquidity sources: Outfield Ventures and Ingresse are raising a fund of up to R$500 million to advance receivables from ticketing and fan-member programs.

The week ahead will bring critical data to recalibrate the scenario. In Brazil, services volume, August retail, and Friday's IBC-Br will give the real measure of the activity slowdown. In the United States, CPI and PPI will be closely watched by those trying to calibrate the Federal Reserve's next steps — and the Fed's Beige Book, also scheduled for Wednesday, may offer clues about the American economy's resilience in an environment of expensive fuel and growing geopolitical tension, with Brent crude already above US$105 per barrel at the Asian open on Monday, pressured by Houthi attacks on Saudi Arabia. The second round, scheduled for the 25th, remains the dominant event — and the question the market needs to answer in the coming weeks is whether the euphoria that took the Ibovespa to 209,000 points will find support in the numbers, or whether it has gotten too far ahead of an adjustment that is not yet guaranteed.