Brazil election shapes foreign investor sentiment and Ibovespa outlook

As Brazil approaches its presidential election, foreign banks are adjusting their exposure to the Brazilian real and equity market. Société Générale reduced its real position to neutral, citing the risk of a looser fiscal stance before the vote and the possibility that the market is under‑pricing a Lula re‑election. The bank also tightened stop‑loss levels on interest‑rate positions to guard against a sharp rise in yields.

JPMorgan’s analysts note that the Ibovespa typically weakens in the six months before an election and rebounds after the first‑round vote, projecting a possible 10% rally in October. The stock index has underperformed other emerging‑market indices by about 24% since April, reflecting heightened fiscal and political uncertainty. The bank expects continued caution from investors but anticipates a gradual return of foreign capital, citing recent inflows of roughly R$1.5 billion in a single session.