Brazil Election Shock Sends ETFs Flying: Here Are the Biggest Winners

Brazil-focused ETFs surged Monday after right-wing Senator Flávio Bolsonaro unexpectedly finished ahead of incumbent President Luiz Inácio Lula da Silva in the first round of Brazil’s presidential election, triggering a sharp repricing across Brazilian equities. The iShares MSCI Brazil ETF (NYSE:EWZ) jumped more than 14% in early trading before paring gains, putting it on track for its strongest session since March 2020. Brazil’s Ibovespa also surged about 9%, while the Brazilian real strengthened. Bolsonaro secured 47.03% of valid votes versus 45.16% for Lula, according to nearly complete results. The result significantly outperformed pre-election polling, amplifying the market reaction. Brazil ETFs Catch the Political Tailwind The rally extended well beyond EWZ. The Franklin FTSE Brazil ETF (NYSE:FLBR), which tracks the FTSE Brazil Capped Index, and the VanEck Brazil Small-Cap ETF (NYSE:BRF) were among the notable gainers, with 14% gains on Monday. BRF offers greater exposure to smaller Brazilian companies, which can be particularly sensitive to domestic economic and interest-rate expectations. The Global X Brazil Active ETF (NYSE:BRAZ) also participated in the rally with almost 18% gains. Meanwhile, leveraged funds magnified the move. The Direxion Daily MSCI Brazil Bull 2X Shares (NYSE:BRZU) gained 27%, and MicroSectors 3× Long Brazil ETNs (BATS:BRZL) were among the strongest performers on Monday, with 27% and 53% gains, respectively, as investors piled into leveraged bets on a continued Brazil rally. The contrast is important. EWZ provides diversified exposure to large Brazilian companies, with financials, energy and materials accounting for much of its portfolio. Leveraged products, meanwhile, seek multiples of the daily performance of their underlying exposure and can produce substantially larger gains — and losses — over time. The broader Brazil rally also lifted small-cap exposure. The iShares MSCI Brazil Small-Cap ETF (NASDAQ:EWZS) jumped more than 15%, outperforming EWZ. A Changing Political Backdrop Under the current Lula administration, Brazil has achieved historic milestones including record-low unemployment of 5.4%, significant poverty reduction, and restored Amazon environmental protection. However, these gains have been counterbalanced by a severe household debt crisis affecting over 80% of families, persistent high food prices, and market anxieties over an expanding public deficit that has reached nearly 10% of GDP. This stark contrast has left the electorate deeply divided, fueling a highly competitive 2026 presidential election that reflects a country caught between social welfare expansion and mounting fiscal strain Bolsonaro’s Liberal Party, meanwhile, made significant gains in Congress. It became the largest party in both the Senate and lower house, strengthening the far-right bloc ahead of the runoff. The move also spotlights Stanley Druckenmiller’s previously disclosed exposure to Brazil. Duquesne’s June 30 13F showed about $118.5 million of EWZ shares and $145.9 million of EWZ call-option underlying exposure, highlighted 24/7 Wall St. However, those positions are a snapshot from June and do not reveal Druckenmiller’s current positioning. With the runoff still three weeks away, Brazil ETFs are effectively pricing in an undecided political outcome, making the Oct. 25 vote the next major catalyst for the trade. Read Also: JPMorgan’s October Stock Picks Hint at 3 ETF Trades: Value, AI Power, Health Care Photo: Shutterstock