JPMorgan sees Ibovespa falling 20% and dollar hitting R$5.50 after Lula win

JPMorgan projects the Ibovespa could fall 20% and the dollar reach R$5.50 in the coming days following Luiz Inácio Lula da Silva's victory in the 2026 presidential election, which contradicted market expectations favoring Flavio Bolsonaro. The bank expects a significant repricing of Brazilian assets, with the stock market's price-to-earnings multiple potentially dropping from 9.7 to around 7 times. Domestic cyclical stocks are seen suffering more, while exporters should outperform due to expected real depreciation. JPMorgan also warns of possible B3 circuit breakers and reduced its recommendation on Brazilian sovereign bonds to underweight. The currency depreciation would represent nearly a 10% decline, with the bank citing fiscal anchor concerns and higher risk premiums in the interest rate curve. JPMorgan maintains overweight on investment-grade corporate credit, preferring exporters like Gerdau, Vale, Suzano, and Embraer, while domestic-focused firms face a more challenging environment.