2026 Election Campaign: The Fiscal Risk the Market Must Monitor

The start of the 2026 election campaign signals a period of high volatility for Brazilian assets, as political rhetoric begins to dictate market risk premiums. With the Selic rate steady at 14.00% per annum, any signs of fiscal instability or unchecked spending by candidates are likely to trigger swift capital outflows. Investors must focus on the alignment between campaign promises and the reality of public accounts, which are already under severe pressure. Market caution is evident, with the commercial dollar trading at R$ 5.22—a 2.12% increase over the last seven days—reflecting broader risk perception. Coupled with a 4.44% 12-month IPCA, the limited room for monetary easing keeps credit costs high. Based on Ray Dalio's credit cycle theory, we are in a liquidity contraction phase where risk appetite diminishes. The market is pricing not just the potential winner, but the viability of public debt for the next four years. With high interest rates leading to a 'crowding out' effect on private investment, the expected volatility over the next 90 days will impact B3 valuations. Investors are advised to follow Benjamin Graham’s principle of 'margin of safety': prioritize liquidity in post-fixed assets linked to the Selic and avoid speculative positions, as fiscal discipline remains the primary driver of long-term stability.