End of candidacy registration: what the market is pricing in with the start of the electoral race

The deadline for 18,000 candidacy registrations marks the formal start of the electoral period, a milestone historically linked to increased volatility in the Brazilian capital markets. Investors should look beyond the candidates to the fiscal viability of their campaign promises. With the commercial Dollar at R$ 5.22, up 2.12% over 7 days, the market is already showing sensitivity to political risk. Historically, electoral cycles trigger a contraction in foreign risk appetite, pressuring the exchange rate. The 0.73% rise in the dollar over the last 30 days reflects institutional anticipation of electoral noise. Meanwhile, the Selic rate held at 14.00% p.a. encourages capital to favor fixed income over riskier assets. Investors are advised to avoid speculation, prioritize assets with solid fundamentals, and hedge against the fiscal risks posed by potential populist measures that could threaten primary account results and inflate future DI pricing. The outlook for the next 180 days suggests continued volatility, with focus shifting from government plan viability to fiscal sustainability during the transition period.