Brazil Stocks to Resume Gains but Upside Seen More Limited

Brazilian Stocks Expected to Resume Gains

According to a Reuters poll, Brazilian stocks are likely to resume this year's gains in the coming months, but the upside is seen as more limited than three months ago.

Ibovespa Index Retreats from Record High

Sao Paulo's Bovespa stock index (Ibovespa) touched a record high in mid-April but has since retreated due to emerging market portfolio rotation, an election scandal, and expectations of smaller interest rate cuts.

Year-End 2026 Forecast

The median estimate from 15 analysts polled between May 15 and May 26 sees the index closing 2026 at 195,000 points, about 10% above Monday's close. Analysts note that Brazilian stocks trade at discounted valuations, particularly in banks, commodities, and domestic companies.

While the medium-term outlook remains positive, further corrections are likely in the coming months. The forecast for mid-2027 was lowered to 200,000 from 210,000 in February, due to portfolio shifts into Asian tech industries benefiting from AI expansion.

Foreign Flows and Election Impact

The Ibovespa has fallen for six consecutive weeks since its mid-April record, driven by a reversal in foreign investment flows. The October presidential election is also being closely watched, with President Lula leading in polls but concerns over fiscal restraint if re-elected.