The result of Brazil's presidential election ran counter to most forecasts. Incumbent President Luiz Inácio Lula da Silva won the Oct. 25 runoff with 51.8% of the vote, while challenger Flavio Bolsonaro received 48.2%. Based on the final tallies, Lula received about 64.2 million votes and Flavio Bolsonaro about 59.8 million, a difference of roughly 4.4 million votes. The victory gives Lula a fourth nonconsecutive presidential term and makes him the first Brazilian presidential candidate to trail in the first round and then win the runoff. Flavio Bolsonaro is the son of former President Jair Bolsonaro, not the former president himself.

In the first-round vote on Oct. 4, Lula received about 45% of the vote and Flavio Bolsonaro about 47%. Because neither candidate secured a majority, the election moved to a runoff. After the first round, prediction market platforms such as Kalshi and Polymarket at one point priced Flavio Bolsonaro's odds of winning above 80%. On the night of the runoff, shortly after 8:30 p.m. Eastern Time, Kalshi still showed Lula at about a 21% chance of winning. Traditional polls conducted in the days before the vote had shown a narrow gap between the two candidates. The final outcome once again put the gap between prediction markets and conventional polls in focus. Tarek Mansour, co-founder and chief executive of Kalshi, had previously explained that a low probability does not mean impossibility; it simply indicates that the outcome is less likely to occur in a similar situation.

Lula's reversal was linked to a mobilization adjustment in the three weeks before the runoff. The campaign intensified outreach to women, younger voters and those who had not voted in the first round, increased its social media use and expanded its reach through channels such as selfie videos and WhatsApp groups. Data showed that WhatsApp channels created by allies attracted more than 10 million members in three weeks, and about 3 million voters who had not voted in the first round cast ballots in the runoff. Lula said he would adjust his governing style, increase public participation and strengthen direct communication between the government and the public.

After the election result was announced, Brazilian assets were quickly sold off. The iShares MSCI Brazil ETF, EWZ, traded in the United States, fell about 22% during trading, with the premarket decline at one point exceeding 25%. U.S.-listed shares of Itaú Unibanco fell about 20%, Bradesco shares fell nearly 30% at one point, and Ambev and Petrobras also declined by more than 15%. Brazil's domestic markets also came under pressure, with Ibovespa-linked futures falling nearly 15% at one point and the cash market seeing pronounced volatility. The real weakened by more than 8% during parts of the session, and yields on January 2031-dated interest rate futures jumped 182 basis points at one point. Some investors had previously increased exposure to Brazilian assets after Flavio Bolsonaro led in the first round, expecting a future government that might strengthen fiscal discipline, cut spending and introduce more business-friendly policies. After Lula's victory, the concentrated adjustment of those positions amplified market volatility.

The election result did not immediately end the political dispute. Flavio Bolsonaro refused to acknowledge defeat and said he would seek to overturn the result through legal channels. The dispute involved a decision by Brazilian Supreme Court Justice Cristiano Zanin to extend voting by two hours. At the time, some areas experienced traffic disruptions and heavy rain, and both camps had requested an extension. Flavio Bolsonaro argued that the decision disadvantaged his campaign and said the electoral process had unacceptable problems. Cassio Nunes Marques, head of Brazil's Superior Electoral Court, said the extension did not change the final outcome. So far, leaders of Brazil's Chamber of Deputies and Senate have recognized Lula's victory.

Lula is about to begin a fourth nonconsecutive presidential term, with a policy direction that places greater emphasis on social protection and public investment while also calling for improved fiscal conditions. Market attention is focused on the fiscal deficit, government debt, interest rate levels and the composition of the economic team. If deficit and debt pressures persist, interest rates may remain elevated, constraining corporate financing costs and the environment for consumption and investment. On foreign policy, Lula has stressed Brazil's diplomatic autonomy and has differences with the United States over trade and regional policy, while Flavio Bolsonaro had previously favored closer political and security cooperation with Washington. During the campaign, Lula also raised the influence of major social media platforms on the election and the possibility of strengthening regulation of digital platforms. Meta denied favoring Flavio Bolsonaro, saying the spread and moderation issues were linked to technical failures and errors in artificial intelligence safety systems and had affected different political camps.

Lula will take office in January next year. How the new government assembles its economic team, advances budget and fiscal reforms and interacts with the Trump administration will unfold in the process ahead.