Brazil election puts fiscal risk and market stakes at center of global vote calendar

  • Brazilian voters will choose between President Luiz Inácio Lula da Silva and challenger Flavio Bolsonaro.
  • Capital Economics forecasts a potential 10% to 20% equity gain under Flavio.
  • Israel, the United States and New Zealand are among other markets facing elections.

Brazil's presidential election is emerging as a key market event, with President Luiz Inácio Lula da Silva and right-wing challenger Flavio Bolsonaro running neck-and-neck ahead of Sunday's vote and a likely October 25 runoff. Flavio, the son of former President Jair Bolsonaro, has focused on cost-of-living concerns, while investors have largely maintained a positive view of Brazil but remain concerned about rising spending and fiscal policy. Capital Economics estimates that a Flavio victory could lift equities by 10% to 20% and lower local-currency bond yields, whereas a Lula victory could weigh on stocks. Markets are also tracking Israel's October 27 Knesset election, the United States' November 3 midterms, New Zealand's November 7 election and political developments in Japan, Britain and Germany. Other recent contests in Hungary, Colombia and Peru have influenced investor expectations, including through promises of closer European alignment, lower taxes, smaller government and policy continuity.

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