Investors in Brazilian stocks should buckle up for more volatility as the country's upcoming presidential election approaches.
Jair Bolsonaro, the far-right candidate leading the polls ahead of the Oct. 7 first round, was nearly stabbed to death earlier this month. Bolsonaro got a boost in the latest polls after the stabbing but is largely expected to lose in a runoff given how polarizing a figure he is.
The election's uncertainty — along with a massive sell-off in emerging markets — dragged Brazilian stocks lower this year. The exchange-traded fund that tracks Brazilian shares fell into bear-market territory earlier this year. The road could get even bumpier for investors in the next few weeks as the contest draws near with no clear-cut favorite to win.
"The outcome will be very important from a macro perspective because it will determine the policy path moving forward," said Alberto Ramos, head of Latin American economics at Goldman Sachs. "The market would like to see a market-friendly candidate win, but that's more of a dream than reality."
Brazil's presidential election features five candidates with a chance to win, including Bolsonaro of the Social Liberal Party, Ciro Gomes of the Democratic Labor Party, Geraldo Alckmin of the Brazilian Social Democratic Party and Fernando Haddad of the Workers' Party, who is replacing imprisoned former President Luiz Inacio Lula da Silva.