Brazil’s one-in-five upset just printed a 23% red candle for EWZ

Brazil’s stock market lost more than $200 billion in value at the open on Monday after President Luiz Inácio Lula da Silva beat Senator Flávio Bolsonaro in Sunday’s runoff, a result that prediction markets had priced at roughly a one in five chance. The iShares MSCI Brazil ETF, ticker EWZ, a basket of Brazilian stocks that trades in New York like a single share, fell as much as 26% from Friday’s close of about $42.60, touching $31.40 before trimming the loss to about 23% at $32.84 by 10:38 a.m. ET. The decline left EWZ roughly where it started 2026 after a 34% gain through Friday.

The dollar rose as much as 12% against the real on Friday, while the Ibovespa, Brazil’s benchmark stock index, fell as much as 17% to about 170,000 points. For a dollar-based investor, those moves at their worst combine to a loss of about 26%, in line with EWZ’s low. B3, the São Paulo exchange, halted trading for 30 minutes after the Ibovespa fell 10% from Friday’s close, its first circuit breaker since the COVID-19 pandemic. The index kept sliding after trading resumed.

Investors had been positioning for the opposite result since Bolsonaro unexpectedly finished first in the Oct. 4 first round, with 47.03% of valid votes to Lula’s 45.16%. The Ibovespa jumped 7.85% the next day, and EWZ gained more than 10% on bets that Bolsonaro would tighten public finances and open the way to lower interest rates. Monday’s drop erased that rally and, at its lows, left the Ibovespa about 11% below its Oct. 2 close.

Polymarket gave Bolsonaro an 82% chance of winning the day before the vote, and Kalshi had him near 80% on Sunday morning. In prediction markets, a contract that pays $1 if a candidate wins trades at 80 cents when traders see an 80% chance. The latest Datafolha survey was tied at 50% each among valid votes, while CNT/MDA showed Bolsonaro ahead 50.5% to 49.5% in mid-October. Lula won 51.79% to 48.21%, a margin of about 4.4 million votes, according to Brazil’s Superior Electoral Court.

Bolsonaro said on Sunday night that he does not recognize the result and will ask the courts to annul the election, after pledging in August to respect the outcome. He objected to Supreme Court Justice Cristiano Zanin’s decision to extend voting until 7 p.m. at the request of Lula’s campaign, which he said changed the rules midgame. His own campaign had separately asked for extra voting time in parts of three states. Outside his campaign headquarters in Brasília, he said in Portuguese, “It is impossible to recognize the result of the elections in the context in which these things happened,” and, “We will use our legal team, we will ask for the annulment of these elections.”