Most global market discussions this year have centered on U.S. tech and the Nasdaq-100’s year-to-date gain. Brazil has quietly done better. The iShares MSCI Brazil ETF (EWZ), up more than 12% from last month’s lows, is now about 19% higher on the year. That is not a minor footnote. For traders accustomed to treating emerging markets as a volatility tax, this is worth a second look.
Market Snapshot
The Ibovespa closed at 185,205 points on September 2, a gain of 3.05% on the session, while the Brazilian real strengthened to about 5.09 per dollar. After 11 consecutive sessions of gains, the index closed at 185,188 on Thursday, September 3, essentially unchanged. The index is not at 200,000 yet. It briefly topped 199,000 earlier this year, and its intraday record is 199,354.
That all-time high matters for technical positioning. A clean break through it would likely force further short covering and attract momentum flows that have so far stayed on the sidelines.
Stocks in Focus
Petrobras (PBR), Vale (VALE), and the major banks are major weights in the Ibovespa. They are the trade, and they have been moving.
- PBR: Petrobras shares were among the most actively traded names during the early-September surge, but the specific turnover figure in the draft could not be verified.
- VALE: Vale’s shares swung sharply in early September, but the specific turnover and single-day percentage move in the draft could not be verified.
- ITUB: Itaú Unibanco is Brazil’s largest private bank. Banks are among the most politically sensitive names on B3, and the election is in the background of every move.
Options traders have been active in EWZ, with call-side flow leading during the early-September burst, but the draft’s exact multiples and premium totals could not be verified as stated.
The Election Factor
Brazil’s first-round vote is October 4, with a potential runoff on October 25. The draft’s candidate-specific claims about Lula seeking a fourth term, Jair Bolsonaro being imprisoned and barred until 2060, and Flávio Bolsonaro leading in every recent second-round poll could not be verified and have been removed.
A local poll showing a tightening race has been read by some investors as reducing the odds of an abrupt policy shift, and that kind of interpretation can translate directly into market moves. The market is not making a clear ideological bet. It is pricing the absence of a blowout outcome, which keeps uncertainty within a range traders can work with.
Rate Cycle
The Selic stands at 14.00% after four consecutive quarter-point reductions. The September 15 to 16 Copom meeting is close enough that every inflation signal and every global yield move gets filtered through the question of whether another quarter-point reduction is safe. JPMorgan, which cut Brazilian equities to Neutral in August, warned that assets typically underperform in the six months before elections, with low election-risk premium currently priced in. That is the counterargument worth respecting.
The Cheat Sheet
- Top Theme: Brazil’s easing rate cycle, commodity sensitivity, and election uncertainty are combining to keep the Ibovespa near its highs.
- Stock to Watch: ITUB. Banks are the cleanest expression of both the rate story and the political risk premium.
- Sector to Watch: Brazilian financials. They have been central to the index’s biggest up days.
- Biggest Risk: A surprise Selic hold at the mid-September Copom meeting, combined with election volatility, could reverse flows quickly. Foreign investors pulled a net R$18.1 billion from Brazilian stocks in August.
- Biggest Opportunity: EWZ has outperformed U.S. big-cap tech year-to-date, and it still has room if the Ibovespa can clear its 199,354 record area convincingly. The draft’s specific P/E and dividend-yield figures could not be verified and have been removed.
- One Thing to Remember: The 200,000 level is not just a round number. It is just above the record zone, and a clean break above it would shift Brazil from a contrarian call to a momentum trade.
