Brazilian Presidential Runoff Odds Shift Toward Bolsonaro After First-Round Surprise
Quick Look
Flávio Bolsonaro surged to over 80% odds on prediction markets after securing more than 47% of votes in Brazil's first-round presidential election, narrowly defeating incumbent Luiz Inácio Lula da Silva and triggering gains in Brazilian assets including the iShares MSCI Brazil ETF and major bank stocks ahead of the October 25 runoff.
AI-generated summary
Why It Matters
Luiz Inácio Lula da Silva is running for a fourth term as president of Brazil, having won back the presidency in 2022 after defeating then-incumbent Jair Bolsonaro. Flávio Bolsonaro is the son of former president Jair Bolsonaro.
Nelson Almeida | Afp | Getty Images
Brazilians will decide in just under three weeks whether to reelect incumbent president Luiz Inácio Lula da Silva or oust him in favor of Flávio Bolsonaro — the son of former president Jair Bolsonaro — as both advanced to a runoff after receiving the most votes in the first-round vote on Sunday.
But the results of the first round are recalibrating how investors are pricing what the final decision will be.
Speculators on prediction market platform Kalshi now give Bolsonaro a more than 80% chance of winning the presidency. Before Sunday's first-round results came in, he had about a 60% chance to win. On Polymarket, Bolsonaro's odds are now 85%, jumping from 63% before the first-round count.
While Bolsonaro was seen as a narrow favorite to win the presidency before Sunday's first round, he was widely expected to trail the incumbent Lula in that initial tally, according to polls before the Sunday vote. This was the case even as Bolsonaro was favored to win a runoff. However, Bolsonaro secured more than 47% of the votes, beating Lula's first-round total by nearly 2 percentage points.
If no candidate receives a majority of the votes in the first round of a Brazilian presidential election, the two who get the most votes advance to a runoff.
Brazilian assets were on the rise following the result.
The iShares MSCI Brazil ETF (EWZ) was up more than 12% on Monday. U.S.-listed shares of Itau Unibanco gained 15%, and shares of Banco Bradesco surged 19%. Brazil's local Bovespa index was up 8%.
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Investors broadly saw Bolsonaro as more favorable to markets, as the candidate is promising greater fiscal discipline. In June, Brazil's deficit-to-GDP ratio was almost 10%.
Lula is running for a fourth term as president. He won back the presidency in 2022 — after a 12-year stint out of the office — when he defeated then-incumbent Jair Bolsonaro. Lula's campaign has tried to tie Flávio Bolsonaro to his father's efforts to contest his 2022 loss and brand the son as corrupt.
The runoff in Brazil will take place on Oct. 25.
Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.
What to Watch
AI outlook — possibilities, not facts
Flávio Bolsonaro will win the October 25 presidential runoff
Likely · Within weeks
Open Questions
- What specific fiscal policy measures will Flávio Bolsonaro implement if elected?
- How will Lula's campaign respond to the shifted momentum in the runoff?
- What voter demographics contributed to Flávio Bolsonaro's stronger-than-expected first-round performance?
