Brazilian markets experience unprecedented moves post-election frenzy

Pradeep Kumar: Pradeep Kumar is a portfolio manager leading PGIM’s emerging-markets debt team, focused on investments in developing-country bonds and related assets. He is relevant to the report because he described the post-election surge in Brazilian assets as an unprecedented market move in his two decades trading the country. Market uncertainty: Analysts cautioned that the strength and durability of the rally would depend on the runoff result and the next government’s fiscal plans. Investor expectations: The rally reflected expectations that a possible change in government could bring greater fiscal discipline and create room for lower interest rates, although investors continued to assess the credibility of the prospective economic program. Election market reaction: Brazilian stocks, bonds, and the real rallied sharply after right-wing candidate Flávio Bolsonaro performed better than expected against incumbent President Luiz Inácio Lula da Silva in the first round of the presidential election.