Political Instability and Institutional Uncertainty: The Impact of Legal Noise on the Ibovespa

The maintenance of visitation restrictions for Flávio Bolsonaro to Jair Bolsonaro, ratified by the Prosecutor General's Office, signals a continued environment of high institutional friction that historically reverberates in Brazil's capital market risk premiums. As the Ibovespa seeks support amidst mixed corporate earnings, persistent tensions at the highest political levels act as a psychological barrier for foreign investors. Regarding the exchange rate, the commercial dollar reached R$ 5.1639, showing an upward trend of 1.81% over the last 7 days and a 0.69% appreciation over 30 days, reflecting a flight to hedge in dollar-denominated assets. Coupled with an IPCA of 4.44% over 12 months, this creates inflationary pressure that limits private investment. While the market often reacts asymmetrically to political noise—penalizing state-owned and regulated sectors—the resilience of companies like Banco do Brasil, which recently posted a R$ 3.9 billion profit, demonstrates value generation that transcends power disputes. With the Selic at 14.00% p.a., the high cost of capital demands strict investment discipline. Over the next 90 to 180 days, we expect 'tail-risk' pricing to continue; investors should prioritize companies with low leverage and strong pricing power.