Quarterly outlook · 4Q26 · post-election editionLeading banks’ projections for year-end 2026 and the first trading day after the runoff election, with Magma’s view for those buying and selling companies.
The market had positioned itself for a change of government and got continuity instead. In a single session, Brazil was repriced: stocks in free fall, a weaker real, long-term rates above 15%. For M&A, political clarity has arrived, but at a new price.
Ibovespa · Oct 26
Biggest drop since March 2020; circuit breaker triggered
US dollar · Oct 26
Up 8.36% on the day; opened at BRL 5.60
DI Jan/2031
+254 bps over Friday, Oct 23
Selic
Pre-election Focus saw 13.25% at year-end
IPCA 2026 · Focus
Above the 4.50% ceiling, collected before the currency shock
M&A through September
968 transactions: −31% in number, +18% in value
October in seven dates
The result does not change the diagnosis; it changes the price. High real interest rates and rising debt were already on the table; now the market wants fiscal proof before giving back the discount.
Magma’s viewThe external backdrop is not helping. The Fed retains a tightening bias, and the war in the Gulf pushed oil prices up again in the very week of Brazil’s election.
Fed Funds
Hike in September; decision on Oct 28 with <10% probability of another hike
US CPI · Sep
Annual inflation picked up again on energy
Brent · Oct 23
Highest level in almost six months; ~US$ 110 on Oct 26
While Brazil was melting down, Wall Street closed higher on Oct 26, supported by expectations for the tech and AI earnings season. The contrast sums up the moment: global capital remains available, but it migrates to where there is earnings growth and predictability.
High US rates and expensive oil narrow the Brazilian Central Bank’s room for maneuver, regardless of domestic politics. The cost of capital in dollars is not expected to fall before 2027.
The economy is slowing, inflation remains above the ceiling and debt is rising. The runoff did not change these numbers, but it changed how the market prices them.
It was the first time a candidate who finished second in the first round won the presidential race. Flávio Bolsonaro said he does not recognize the result and will seek to have the election annulled; the parties that backed him have recognized Lula’s victory.
Change in the first trading session after the runoff
Domestic and credit-sensitive sectors fell twice as much as the index; exporters held up
Chamber of Deputies from 2027
The Oct 26 Focus survey was collected up to the Friday before the runoff. It shows GDP growth of 1.80% in 2026 and 1.31% in 2027, IPCA inflation of 5.19% and a Selic of 13.25% at year-end. September’s IPCA rose 0.82%, above expectations. XP projects IPCA of 5.1% in 2026 and 4.4% in 2027, with upside risks from El Niño and lagging fuel prices.
The consensus expected a stronger real. The market disagreed in a single day.
Focus median for the dollar at end-2026 versus the spot rate on Oct 26
Swift announcement of a credible economic team committed to the fiscal rule. The risk premium partially recedes and the Selic cutting cycle resumes in 2027.
Uncertainty over the team, post-election institutional noise and high oil prices. Long-term real rates above 8% and the Selic parked at 13.75% for longer.
The electoral uncertainty is over; the fiscal uncertainty is not. Over the coming weeks, the name of the Finance Minister will matter more to asset prices than any activity data.
M&A reached the election concentrated in large transactions and defensible theses. The Oct 26 shock opens a repricing window before year-end.
Through September: deal count falls, value rises
M&A only
Deals and BRL 144.8 bn through September
Private equity
62 transactions, with a strong September
US in Brazil
Acquisitions, leading among foreign buyers
is how much Brazilian equities could fall in dollar terms in BTG’s scenario. For foreign buyers, Brazilian assets became cheaper overnight.
| Sector | Post-election signal |
|---|---|
| Agribusiness and exporters | A weak real boosts revenues in reais and attracts foreign capital |
| Energy and transition | Oil above US$ 110 and long-term contracts support the theses |
| Infrastructure | Indexed revenues attract strategic buyers; the cost of debt rises |
| Technology / SaaS | Most active sector: 161 deals through September (TTR Data) |
| Critical minerals | Rare earths drove the year’s deal value in Brazil |
| Real estate and consumer | The hardest hit on Oct 26 (−28.6% and −26.1%); buyers will ask for a discount |
The November–December window remains open, but at a different price. Sellers with dollar-linked revenue, good governance and audited data are negotiating from a stronger position than a week ago. For the rest, price structure matters more than the multiple.
The banks’ forecasts were published before the runoff. They serve as a starting point; the market itself on Oct 26 had already moved away from them, especially on the exchange rate.
| Economic indicator (2026) | Itaú Unibanco | Bradesco / BTG | XP / J.P. Morgan | Focus (Oct 26) | Market Oct 26 |
|---|---|---|---|---|---|
| GDP growth | 1.7% | 1.7% / 1.8% | 1.7% / — | 1.80% | — |
| Inflation (IPCA) | 5.1% | 4.9% / 5.2% | 5.1% / — | 5.19% | — |
| Selic rate (end of 2026 cycle) | 13.75% | 13.25% / 13.75% | 13.25% / 13.75% | 13.25% | Jan/28 DI: 14.80% |
| Exchange rate (USD/BRL, end-2026) | BRL 5.30 | BRL 5.00¹ / BRL 5.40 | BRL 5.00 / — | BRL 5.05 | BRL 5.41 spot |
| Net debt (% of GDP) | rising² | — | — | 70.1%³ | — |
| Gross debt (% of GDP, projected) | rising² | — / 83.2% | 83.6% / — | — | 82.9% (Aug, actual) |
The consolidated view of research teams is defense with selectivity: carry high rates, hedge in dollars and wait for the economic team to be named before adding domestic risk.
| Asset class | Position | Rationale |
|---|---|---|
| Floating-rate (CDI) | Overweight | A 13.75% Selic with no prospect of rapid cuts rewards liquidity and provides firepower to buy depressed assets |
| Inflation-linked (NTN-B) | Gradual entry | Long-term real rates back above 8% (BTG) are a historic entry point, but volatility calls for staggered purchases |
| Long fixed-rate bonds | Avoid | Curve sensitive to fiscal risk and currency pass-through; the premium may widen further before easing |
| Exporters and defensive stocks | Prefer | Dollar revenue, net cash and low leverage; BTG cites energy, beverages, capital goods, aerospace, insurers and Itaú |
| Domestic cyclical stocks | Underweight | Consumer, retail, construction and small caps are the most exposed to high rates for longer |
| International exposure (Tech/AI) | Hold / increase | Diversifies country risk and captures the AI earnings cycle; after the dollar’s rise, invest in stages |
| Credit REITs (high grade) | Prefer | Receivables indexed to CDI and inflation capture high rates |
| Brick-and-mortar REITs | Caution | The real estate index fell 28.6% on Oct 26; a higher discount rate weighs on property values |
| Commodities (energy and agriculture) | Strategic | Brent above US$ 110 and a weak real: a double hedge against the quarter’s two shocks |
The announcement of the economic team and the fiscal anchor for the fourth term. In BTG’s view, it is the only factor capable of bringing long-term rates back below 8%.
Post-election institutional noise combined with a renewed escalation in Hormuz and a more hawkish Fed in December, pressuring the exchange rate, inflation and the Selic at the same time.
Economic, political and corporate-transaction research reports and publications released between September and October 26, 2026.
Informational content prepared by Magma Transações Societárias based on public reports from financial institutions and market data. Projections belong to the respective institutions and were, for the most part, published before the runoff; revisions are expected in the coming weeks. This material does not constitute an individual investment recommendation.