Macroeconomic, Political and M&A Market Outlook | 3Q26

3Q26 closed with global rates rising again, oil above US$ 95 and Brazil slowing with inflation above the ceiling. In M&A, the market did fewer but larger deals.

Fed Funds

3.75–4.00%

First hike since 2023, on September 16

Brent

> US$ 100

Broke through on September 9 with the US–Iran war

Selic

13.75%

0.25 pp cut on September 16; Focus sees 13.50% at year-end

IPCA 2026 · Focus

5.01%

Above the 4.50% target ceiling

Gross debt

82.9%

of GDP in August, highest level since 2020

M&A through August

BRL 210.7 bn

834 transactions: −31% in number, +11% in value

The quarter in five dates

3Q26 events and the October 4 first round (in terracotta, outside the report window).

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The cost of capital remains high on both sides of the Atlantic. In 2026, deals get done by those with quality assets and creative price structures.Magma’s view

Global Scenario: the Fed raises rates again and oil soars with the war in the Gulf

The quarter flipped the switch on the global cycle. The Fed moved from cuts to a hike, and the US–Iran war put oil back in the role of main inflation risk.

Federal Reserve: the hawkish turn

On September 16, the FOMC unanimously raised the Fed Funds rate by 0.25 pp to 3.75%–4.00%. It was the first hike since mid-2023.
Fed Chair Kevin Warsh pointed to inflation that has been high for too long and upside price risks.
The dot plot points to rates between 4.1% and 4.4% at year-end, and the market is already pricing in another hike.
For Brazil: higher US rates narrow the interest-rate differential, pressure the exchange rate and make foreign capital more expensive.

Geopolitics and commodities

The US–Iran war entered its seventh month, with traffic disrupted in the Strait of Hormuz, the route for about 20% of global oil and LNG.
Brent broke through US$ 100 on September 9 and hovered around US$ 96 in early October.
The EIA projects an average of US$ 91 in 2026 and US$ 74 in 2027: normalization is expected, but not now.
In Brazil, the shock arrives through fuel, freight and fertilizers, compounded by a stronger El Niño.

Corporate drivers: AI holds up earnings

Technology and semiconductor earnings continue to support global equity markets, despite a higher cost of capital.
J.P. Morgan counted US$ 3.2 trillion in global M&A in the first half, with technology and data infrastructure among the drivers.
The US and China agreed to hold talks on AI and cut tariffs on US$ 30 billion of goods, a partial relief on the trade front.

Magma’s view

“Higher for longer” is back. For anyone pricing assets in Brazil, this means high discount rates and greater weight for strategic buyers over leveraged financial buyers.

Domestic Scenario: activity, politics and fiscal policy

Brazil reaches the end of 3Q26 with growth losing steam, inflation above the ceiling and rising debt, a picture that limits room for rate cuts.

Focus in 3Q26: inflation above the ceiling, GDP falling

Weekly Focus Report median for 2026, August to October

Source: Central Bank of Brazil, Focus Report, editions from August 10 to October 5, 2026.

Growth and inflation

GDP grew 0.5% in 2Q26, driven by agriculture (+2.8%) and extractive industry (+3.4%); household consumption fell 0.4%.
The major banks are converging on GDP growth of 1.7% to 1.8% in 2026, below Focus.
The Central Bank projects IPCA of 5.2% in 2026 and convergence to 3.1% only in 2Q28.
The September IPCA-15 rose 0.70%, after deflation of 0.4% in August.

Political and regulatory landscape

The campaign reached September as a close race, which raised the risk premium on local assets.
In August, J.P. Morgan downgraded Brazil to neutral, citing the weak performance of assets in the pre-election months.
Ending the 6×1 work schedule entered the agenda and is seen by the banks as an additional inflation risk.
Fiscal and credit stimulus has added up to about BRL 200 billion since the end of 2025 (XP), running counter to monetary policy.

Fiscal policy, Selic and exchange rate

Gross debt reached 82.9% of GDP and net debt 69.3% in August. Nominal interest costs 8.86% of GDP over 12 months.
The consolidated public sector’s primary deficit is 0.62% of GDP over 12 months.
Copom cut the Selic to 13.75% on September 16. Focus sees one more cut, to 13.50%, and a 12% Selic in 2027.
BTG describes the pace of debt growth as unsustainable, which prevents long-term rates from falling.
The Focus exchange-rate projection remains at BRL 5.20; among the banks, projections range from BRL 5.00 to BRL 5.40.

Magma’s view

Real rates near 9% and an open election form the backdrop for negotiations. Sellers need a solid investment thesis; buyers want contractual protection.

After the close · outside the 3Q26 window

October 4 first round: the election goes to a runoff on October 25

47.03%

Flávio Bolsonaro (PL) · valid votes

45.16%

Luiz Inácio Lula da Silva (PT) · valid votes

In its first market reaction, J.P. Morgan again recommended Brazilian equities and estimated upside of 12% to 20%. The bank stresses that, whatever the outcome, the next government inherits high real interest rates and a fiscal deficit.

For M&A: the outcome on October 25 is likely to unlock processes paused while awaiting political clarity. The November–December window deserves the attention of sellers and buyers.

M&A activity: fewer transactions, more capital

Brazilian M&A entered the election period with the lowest number of transactions in years, but with more capital per deal: BRL 210.7 billion across 834 deals through August.

Deal count falls and value rises in every 2026 reading

Sources: TTR Data; Aon, TTR Data and Datasite (1Q26).

Volume vs. quality

Through August, the number of deals fell 31% and capital deployed rose 11% (TTR Data). August added 57 deals and BRL 12.6 bn.
KPMG recorded 292 transactions in 2Q26, versus 318 in 1Q26. Cross-border deals accounted for BRL 70 bn in 2Q alone.
Foreign investors completed 155 transactions worth BRL 58.7 bn in the first half.
The pattern is consolidation of the core business: fewer bets, larger assets, more defensible theses.

Valuation gap and risk protection

With the Selic at 13.75% and an open election, the gap between asking and offered prices widened.
Tools that unlock deals: earn-outs, escrows, R&W insurance and MAC clauses between signing and closing.
With private equity capital more expensive, advisors report more structured solutions, such as mergers and reverse IPOs.

Sectors in focus

Sector	Signal of the quarter
Technology and Digital Services	Leader in deal count in the half (TTR Data)
Energy and Energy Transition	Value jumped from BRL 2.7 bn in 1Q to BRL 18.2 bn in 2Q, with megadeals in bioenergy and transmission (KPMG)
Agribusiness	Amaggi bought 40% of FS Bioenergia for about BRL 4.9 bn
Infrastructure	Taesa bought transmission assets from Energisa for BRL 1.5 bn
Critical minerals	USA Rare Earth acquired the mining company Serra Verde (rare earths)

Investor appetite

Private equity: more selective and focused on scale. In 1Q26, just 17 PE transactions deployed more than US$ 3.1 bn.
Strategic buyers: gaining ground, because they fund deals from their own balance sheets and capture synergies that justify the price.
Middle market: where most opportunities lie, with more attractive entry multiples and less competition per asset.

Magma’s view

The 2026 buyer pays for quality, not for growth at any price. Companies with good governance, audited data and well-defined working capital close faster and at better multiples.

Comparative matrix of consensus projections

The banks are more pessimistic than Focus on GDP (1.7%–1.8% versus 1.85%) and split on the Selic: some see one last cut, others a pause at 13.75%.

Economic indicator (2026)	Itaú Unibanco	Bradesco / BTG	XP / J.P. Morgan	Focus (Oct 05)
GDP growth	1.7%	1.7% / 1.8%	1.7% / —	1.85%
Inflation (IPCA)	5.1%	4.9% / 5.2%	5.0% / —	5.01%
Selic rate (end of 2026 cycle)	13.75%	13.25% / 13.75%	13.25% / 13.75%	13.50%
Exchange rate (USD/BRL, end-2026)	BRL 5.30	BRL 5.00¹ / BRL 5.40	BRL 5.00 / —	BRL 5.20
Net debt (% of GDP)	rising	69.3% actual²	69.3% actual²	—
Gross debt (% of GDP, projected)	rising	82.7%¹ / 83.2%	83.3%¹ / —	83.3%

Latest projection released in the June–July 2026 review; the others are from September.
Banks publish gross debt projections. For net debt, the reference is the actual figure reported by the Central Bank for August.
J.P. Morgan does not publish a full forecast table; the bank projects a final Selic cut in September, to 13.75%, followed by a long pause until 2Q27.

Where the views diverge

Selic: XP and Bradesco see 13.25%, as the economy slows sooner than expected. Itaú, BTG and J.P. Morgan see a pause at 13.75%, given sticky inflation.
Exchange rate: a BRL 0.40 range between the most optimistic projection (XP and Bradesco) and the most conservative (BTG).
Inflation: all above the 4.50% ceiling; BTG is the most pessimistic, at 5.2%.

Allocation recommendations by asset class

The consolidated view of research teams is defensive with optionality: carry high real rates and keep selective exposure to assets that gain if the risk premium falls after the election.

Asset class	Position	Rationale
Inflation-linked (NTN-B)	Overweight	Real rates near 8% a year on long-dated bonds protect against supply shocks and fiscal risk
Floating-rate (CDI)	Neutral to overweight	A 13.75% Selic rewards liquidity and serves as a tactical reserve for the post-election period
Defensive stocks	Neutral to overweight	Utilities, sanitation and telecom: predictable cash flow and dividends amid high rates
Domestic cyclical stocks	Selective	Retail and consumer have depressed valuations and greater sensitivity to falling rates, with electoral volatility
International (Tech/AI)	Hold	Technology and semiconductor earnings remain robust; a hiking Fed calls for selectivity
Credit REITs (high grade)	Prefer	Receivables indexed to inflation and the CDI capture high rates
Brick-and-mortar REITs	Caution	A high discount rate weighs on property values
Commodities (energy and agriculture)	Strategic	Protection against the oil shock and reinforcement of Brazil’s food security thesis

Trigger to watch

The October 25 result. J.P. Morgan estimates 12% to 20% upside for Brazilian equities if the risk premium recedes with a stronger real.

Main risk

A renewed escalation in Hormuz combined with a more hawkish Fed, pressuring the exchange rate, inflation and the Selic.

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Sources

Economic, political and corporate-transaction research reports and publications released between July and October 2026.

Itaú UnibancoItaú Macro Research, September scenario review
BradescoEconomic Research Department, September projections
BTG PactualBTG Macro Strategy, September scenario review
XP InvestimentosXP Macro, September scenario review
J.P. MorganGlobal & Emerging Markets Research and Latin America Equity Strategy
Central Bank of BrazilFocus Report, 3Q26 Monetary Policy Report and Fiscal Statistics
Federal ReserveFOMC statement of September 16, 2026
U.S. Energy Information AdministrationShort-Term Energy Outlook
FGV IBRESurveys and Confidence Indices
TTR DataM&A reports for Brazil and Latin America
KPMGQuarterly Mergers and Acquisitions Survey, 2Q26
Aon, TTR Data and DatasiteLatin America M&A report, 1Q26
Superior Electoral Court (TSE)Results of the first round of the 2026 General Elections

Informational content prepared by Magma Transações Societárias based on public reports from financial institutions. Projections belong to the respective institutions and may be revised at any time. This material does not constitute an individual investment recommendation.