A Bolsa caiu 16% com Lula até agora. Mas o estrago é maior do que parece

The Bolsa experienced a 16% drop following the reelection of Lula, but the losses run deeper than initially apparent. For instance, Casa Bahia fell by 20% today, while Cosan lost 12% and Cyrela dropped 11%. Even more stable sectors like banking and utilities also joined the plunge. The financial index IFNC dropped 4.76%, and the electricity sector index IEE fell 3%, with AXIA Energia down 5.2%.

Since Lula's reelection, the Ibovespa has accumulated 16.6% losses across three trading sessions. However, individual pain is worse than collective.

Companies like Vamos (Simpar) have lost 60% of their market value, followed by Magazine Luiza (59%), Cosan (55%), Hapvida (52%), C&A and Cyrela (50%), MRV&Co (48%), Localiza and Assaí (43%). Amid the bloodshed, investors are trying to gauge how long the downturn will continue. Beyond the impact of the election, a new factor that weighed in today was BTG's upward revision of inflation projections.

The bank raised the expected IPCA for 2027 from 4.8% to 5.9% and for 2026 from 5.3% to 5.4%. This has raised a yellow flag for the possibility of the Central Bank having to stop the cycle of interest rate cuts at the next meeting, putting pressure on leveraged companies. "Until there are better signs of fiscal adjustment, the trend is that financial conditions, stocks and DI will continue to worsen," said a buy-side analyst.

"The trajectory before the elections was unsustainable and now it's worse. The gas and diesel prices are suppressed, and the promises made are unfulfilled. The government will have to send a message that what was promised in the elections will not be delivered, and for now, they don't seem ready to do it." A manager noted that the market may be starting to price in the risks generated by Flávio Bolsonaro's decision to seek asylum in the US.

"If Trump doesn't recognize the election and brings sanctions or the Magnitsky Law, the banks are the ones who suffer. It was the same with Magnitsky: they hit the banks." Today, Flávio published a letter proclaiming himself the "true elected president" and thanking Trump. Shortly after, he changed this part of the text, referring to himself only as "the leader of Brazil."

One manager said that the pressure on the stock market could continue even without new news, as several multi-asset funds have suffered monumental losses and may need to liquidate positions to handle investor withdrawals. This could generate a "second wave" of decline in the market driven by withdrawals, though he believes it hasn't started yet.

"I believe the fall of the Ibovespa hides a deeper movement of re-pricing of Brazilian risk. The stock market got cheaper, but it doesn't mean the adjustment process has ended." This manager, who made a hedge before the elections with a short position in the Ibovespa, said that many multi-asset funds were over-leveraged in their bets on Flávio, "100% confident in his victory."

With the diversified funds sector battered for a long time, some funds may have seen the election as an opportunity to salvage the year, letting caution go. "When everyone goes in the same direction, unanimity is foolish," said this manager. Former UBS-BB analyst Giuliano Ajeje wrote on LinkedIn that "the violence of the reaction to the markets suggests there was little protection" in the case of an unexpected election result.

The market had bet on Flávio Bolsonaro's victory. Lula won. Those who paid dearly for a 70% chance proved that 30% also happened.