Instability within the Bolsonaro family sparks uncertainty over political capital and the Ibovespa

Public discord within the Bolsonaro family, underscored by Eduardo Bolsonaro’s endorsement of criticism against Michelle, is hitting the market at a moment of extreme institutional sensitivity. Our analysis suggests this political volatility is not an isolated event but the fourth consecutive signal of instability, directly impacting the risk perception that hinders foreign capital inflow to Brazil. With the Ibovespa struggling to break resistance levels, liquidity is being drained by uncertainties that transcend the electoral field and affect long-term governance. Despite the commercial Dollar holding at R$ 5.1512 and a 0.67% drop over 7 days, the risk premium on local assets reflects the fragility of the conservative bloc. With the Selic rate at 14.00% p.a., the opportunity cost for investors is high, turning political noise into a catalyst for 'flight to quality' movements. Institutional instability has become the primary driver of volatility on the B3, with the market pricing in a permanent discount for political uncertainty rather than operational fundamentals. The lack of cohesive leadership within the opposition discourages long-term institutional investment. Over the next 180 days, volatility is expected to intensify, and we maintain a stance of extreme caution, advising investors to focus on assets with robust margins of safety.