Gavekal recommends buying assets in Brazil in case of strong fall with Lula victory

Gavekal, the macro research firm, has reportedly recommended that investors buy Brazilian assets in anticipation of a sharp selloff should Lula win the presidential election. The logic as framed in the headline centers on political risk premia: a Lula victory is typically priced as a negative shock to Brazilian assets because of market concerns over fiscal discipline, spending expansion, and state intervention, so a contrarian view holds that such a drawdown could create an entry point. The assets most directly exposed are Brazilian equities and the real, along with domestic sovereign bonds, where foreign capital flows and rate expectations would transmit any repricing. The headline itself does not specify the magnitude of the expected fall or the timeframe, and it should be read as a research view rather than a confirmed market outcome. Traders will be watching the next major opinion polls and the first post-election fiscal signals from the incoming administration, particularly any statements on the spending framework and the fiscal target.

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