Candidacies and the 'Custo Brasil': What the stability of names reveals to the market

The officialization of presidential candidacies, such as Rui Costa Pimenta's fourth attempt, marks the start of a period of increased political volatility that invariably reverberates in the risk premium demanded by the market. With the commercial Dollar fluctuating around R$ 5.22, up 2.12% in the last 7 days, institutional predictability has become the scarcest asset for investors. Understanding the economic programs of the candidates is crucial for assessing the fiscal trajectory in the coming years. Amid persistent inflation, with the 12-month IPCA at 4.44%, the market remains cautious about the correlation between public spending and the maintenance of a credible fiscal target. Macro-structural analysis suggests a cycle where caution outweighs the search for aggressive returns, as the market anticipates uncertainty, raising the risk premium and putting pressure on long-term interest rates. The current exchange rate nervousness is linked to perceptions of state solvency, particularly when political rhetoric overlooks budgetary constraints. For the next 180 days, volatility is expected to persist as the market reacts to monetary and fiscal policy signals. Investors are advised to prioritize diversification, hard currency assets, and inflation-indexed securities while avoiding sectors heavily dependent on government subsidies.