Stock market has worst day in 28 years after Lula's re-election, and channel highlights what separates opportunity from trap

The Ibovespa recorded the worst day in 28 years after Lula's re-election, with a 16% drop at the maximum devaluation and a 10% rise in the dollar, according to the channel Investidor Sardinha. The circuit breaker was activated at 9:57 am, and around 35 thousand points from the stock market evaporated in one hour, in a movement that the presenter compares to that of March 1, 2020, during the pandemic.

At the day's low, the index reached 169.5 thousand points, the August level. On October 2, before the first round, it was at 192,138 points. It reached 207,190 points on October 5th, with Flávio Bolsonaro ahead, and closed at 205,083 points on Friday, October 23rd. At the opening of trading after the election, it scored 172 thousand points.

For the presenter, part of the drop is the return of a previous high: the market was already pricing in Flávio Bolsonaro's victory, the so-called Flávio trade. Therefore, according to him, comparisons with other historical declines should be made with caution. Among Ibovespa's biggest daily declines, the channel lists the Collor Plan (21% on March 21, 1990), the 1998 Russian moratorium (15.8%) and the pandemic (14.8% on March 12, 2020).

Who lost the most and who won

The biggest losses hit companies that depended on the expectation of lower interest rates. According to the channel, Magalu fell 55%, B3 48%, C&A 47%, Cosan 45%, Cyrela 43%, Assaí 42% and MRV 41%. Outside the index, Simpar, EcoRodovias and Movida fell by more than 60%. Among banks, XP lost 51%, Inter 38%, Banco do Brasil 31%, Bradesco 27%, Nubank 21% and Itaú 17%, while Santander fell 4%. The presenter mocked the idea that bankers support high interest rates or the government: according to him, everyone became poorer that day.

Petrobras fell 12% (PETR4) and 10% (PETR3), cushioned, in the channel's assessment, by oil at around 100 dollars. Exporters rose: Suzano 7.7%, Embraer 7.6%, Vale 6.3% and Klabin 3.7%. According to the presenter, those who sell in dollars and produce in reais benefit from the exchange rate, the opposite of what happens with retail.

Long interest rates and fiscal fear

Future interest rates also rose. According to the numbers mentioned in the video, the DI 2033 went from 12.7% to 14.6%. The presenter states that the market's fear is not Lula's figure, but the account: debt, campaign promises without new revenue and the absence of spending cuts. He highlights that the name of the Finance Minister is still uncertain, with the governor of Piauí, Rafael Fonteles, as the most popular, and that the 2027 Budget will be the first test. According to him, the right has 59 deputies and 64 senators, which can stop changes, but also adjustments.

The channel remembers 2002: the dollar went from 4 reais, at the height of fear, to 2.15 reais at the end of 2006, and the Ibovespa went from 8 thousand to 42 thousand points. For the presenter, what changed the scenario was the appointment of Henrique Meirelles to the Central Bank and the primary surplus: the market, he says, bought the adjustment, not the president.

What to watch, according to the channel

The presenter advocates separating what fell along with the market from what fell due to fundamentals, looking at companies' debt before the price, since with Selic at 13.75% a company in debt is not cheap, and avoiding impulse decisions, as the circuit breaker shows the strength of the sale, not its end. He also mentions that pre-fixed fixed income linked to the IPCA now pays more.

As thermometers, it points to the name of the Treasury, the dollar above 5.50 reais and the DI 2035 above 14% for weeks, and the fiscal target. For the channel, discount is not synonymous with low price. The content reflects the presenter's analysis and does not constitute investment advice.

Automatically translated from Portuguese.