Brazil Stocks Crash After Lula’s Reelection: EWZ Plunges 20%, XP Loses Nearly Half Its Value

By Tech & Money Press · October 26, 2026

Brazilian stocks had one of their worst days on record on Monday after President Luiz Inácio Lula da Silva won Sunday’s runoff election. The iShares MSCI Brazil ETF (EWZ) fell 19.8%, wiping out the entire rally that followed Flávio Bolsonaro’s first-round lead, and U.S.-listed Brazilian stocks lost between 15% and 48% in a single session.

The election result

Lula won the Oct. 25 runoff with 51.8% of the vote, against 48.2% for Sen. Flávio Bolsonaro. Three weeks earlier, Bolsonaro had led the first round with 47% to Lula’s 45.2%. Investors bet that a Bolsonaro government would cut spending, lower fiscal risk and bring interest rates down. That bet sent EWZ up 12.5% on Oct. 5 alone. Monday’s result reversed it in one day.

The damage

Financial stocks took the hardest hit because they are the most sensitive to interest rates. XP, a São Paulo brokerage, had jumped 32.8% on Oct. 5, its best day ever, on hopes that lower rates would push Brazilian savers into stocks and funds. It gave all of that back and more on Monday. MercadoLibre held up better, but Brazil still generated about 52.6% of its 2025 revenue. Brazilian real futures fell roughly 10%.

Why markets care: fiscal credibility

The worry is government spending and debt. Investors fear a new Lula term means looser budgets, which can keep inflation and interest rates high and weaken the real. “Lula has won the election; restoring fiscal credibility will be the harder task,” said Andrés Abadía of Pantheon Macroeconomics. Congress adds another hurdle: Bolsonaro’s party holds 121 seats in the lower house, which could limit any fiscal plan. Traders are now waiting for Lula’s choice of finance minister and his first budget signals.

Our Take

EWZ gapped down to $31.71 at the open and touched $31.40, but it bounced to close at $34.15, near the day’s high of $34.54. That 9% rebound off the low shows some buyers stepped in. Still, the ETF is now below its Oct. 2 close of $38.19, the level before the first-round rally began. Volume reached about 299 million shares, roughly 3.6 times Friday’s volume and the heaviest in at least six weeks. That looks like forced selling as investors unwound their Bolsonaro bets.

Key levels we’re watching on EWZ

Resistance

• $36.82 (Oct. 2 low): The first bounce target and the bottom of the gap left on Oct. 5.
• $38.19 (Oct. 2 close): A reclaim of this level would mean the market is rethinking Monday’s panic.

Support

• $31.40 (Monday’s low): The first level buyers need to defend.
• $29.38 (52-week low): If Monday’s low breaks, this is the next major support.

Bottom line: Capitulation days like this often bring a relief bounce, but without a credible fiscal plan, rallies into the $36.82–$38.19 zone are likely to meet sellers. A break below $31.40 opens the door to the 52-week low. For traders, waiting for Lula’s cabinet picks is safer than trying to catch a falling knife.

What to watch next

• Lula’s finance minister pick and his first fiscal signals.
• The Brazilian real and local bond yields, which will show whether the selling is spreading.
• Wednesday, Oct. 28: The Federal Reserve’s rate decision, which affects all emerging markets.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading involves risk, including the possible loss of principal. Always do your own research and consult a licensed professional before making investment decisions.

Sources: Price data from Webull (as of Oct. 26, 2026). Election results, market reaction and analyst comments via Benzinga.