Brazil's financial market ended October under heavy pressure, with the dollar surging and stocks plunging. For the month, the Ibovespa lost 9.88%, its worst performance since June 2022, when it fell 11.5%. The dollar rose 5.27%, bringing its gains in 2026 to 0.81%.
The damage was concentrated in the final stretch. In the last week of the month, the U.S. dollar rose more than 9%, its biggest weekly gain since the 2008 financial crisis. The Ibovespa fell 18.12% over the same period, its steepest weekly drop since March 2020, when it had lost 18.88% in the initial fallout from the pandemic.
Dollar ends the month at its highest level of the year
The commercial dollar ended October at R$ 5.446, its highest closing value of 2026. On the last trading day of the month, it reached R$ 5.463 before giving back some of its gains.
According to João Victor da Silva, economist and market analyst at Orsitec, some investors had positioned themselves for a victory by Flávio Bolsonaro. Following the result, expectations for how the economy would be managed were revised.
“The market always reacts to expectations,” he says. In practice, stock, dollar, and interest rate contract prices reflect projections for growth, inflation, and public finances. When the expected outlook changes, investors adjust their positions, which can intensify fluctuations,” he adds.
The weekly gain of 9.15% came right after the presidential election runoff and was the largest since October 2008. Some of the volatility on the final day was due to the formation of the month-end Ptax, a rate calculated by the Central Bank and used as a benchmark for settling currency futures contracts.
Investors also reassessed their positions after the election results. Expectations surrounding the appointment of the next government’s economic team and its plans for public finances kept the market focused on fiscal policy. Ahead of the All Souls’ Day holiday this Monday (2), there was also a search for currency protection.
Stock market falls for the fifth straight session
The Ibovespa closed the month at 167,900 points, marking its fifth consecutive losing session. The pressure intensified after Lula’s reelection. On the first trading day after the result, Monday (26), the drop triggered a circuit breaker, a mechanism that temporarily halts trading when losses are substantial.
Foreign capital outflows also weighed on the market. B3 data showed a net withdrawal of nearly R$ 7.6 billion from the secondary stock market during the first three trading sessions of October’s final week.
External factors also added pressure
In addition to domestic uncertainty, the Brazilian market faced an unfavorable international environment, with investors cautious about U.S. technology companies and the outlook for global inflation and interest rates.
On the last trading day of the month, the S&P 500 fell 1.82% in New York, reflecting concerns about Big Tech earnings and investments in artificial intelligence. The sharp drop in technology and AI stocks weighed on the dollar and stock markets in other countries.
The article “Lula Effect: Stock Market Has Its Worst Month Since 2022 and the Dollar Soars” was first published on BeInCrypto Brasil.