Nov 10, 2026 · 15 min
Elections leave Brazil’s fiscal test and market fundamentals intact
Top of the Morning: Emerging Markets - Reflections on US and Brazil’s elections
The episode separates election-driven market noise from the fiscal, monetary, earnings, and geopolitical forces that will shape investment outcomes.
- 1Brazil’s election leaves investors waiting for credible fiscal consolidation and a workable strategy for navigating Congress.
- 2U.S. midterm results may reshape legislation and oversight, but growth, inflation, policy, earnings, and geopolitics remain central.
- 3The recommended stance is to stay invested while seeking selective opportunities across equities, fixed income, commodities, and emerging markets.
Don't miss
Alejo Czerwonko argues that Brazil’s market selloff may have limited further downside, but investors should wait for credible fiscal action before treating it as an opportunity.
The brief
Alejo Czerwonko frames Brazil’s presidential election and the U.S. midterms as political events whose market effects remain secondary to broader economic and geopolitical forces.
Brazil’s result triggered a sharp market reaction, but Lula da Silva’s return leaves the central question unresolved: can the government restore fiscal credibility and work with Congress?
Brazilian assets may have limited additional downside because of congressional checks and the country’s importance in food, energy, and critical minerals, though near-term catalysts remain scarce.
After the Democratic sweep of both U.S. congressional chambers, the discussion separates likely changes in legislation and oversight from presidential control of foreign policy and trade.
The investment conclusion is to remain invested, focus on fundamentals, and use selective opportunities in equities, short- and intermediate-term fixed income, commodities, and emerging markets.
What was said on this episode
19 statements · 10 positive · 6 negative · 1 mixed · 2 neutral
Brazil’s central economic challenge, fiscal credibility, remains unresolved after Lula’s election
“the central economic challenge that is defining Brazil these days is unresolved, which is fiscal credibility”
Listen at 4:08
Brazil’s fiscal dynamics are unsustainable
“Fiscal dynamics are unsustainable”
Listen at 4:44
Negative sentiment toward Brazilian assets will persist until fiscal clarity emerges
“negative sentiment impacting Brazilian assets is unlikely to fade until we have clarity on the fiscal front”
Listen at 5:51
Further market correction in Brazil is unlikely because mitigating factors limit downside
“we think it's unlikely in part because there are mitigating factors preventing that from happening”
Listen at 6:43
Further downside for Brazilian assets is relatively limited
“further downside, I think it's relatively limited”
Listen at 7:25
Patient investors may begin engaging Brazilian assets despite lacking immediate catalysts
“for patient investors, it might be worth engaging already, yet there's no immediate triggers”
Listen at 8:13
Democratic control of both chambers will affect the U.S. domestic legislative agenda
“a change in control of both chambers will, of course, affect the domestic legislative agenda”
Listen at 9:02
The U.S. president retains authority over trade, immigration, and foreign policy
“trade, immigration, foreign policy at large. These are all things that the U.S. president retains authority on”
Listen at 9:24
The U.S. midterm election has limited importance for investors
“this election doesn't matter all that much”
Listen at 10:03
Investors should focus on fundamentals and avoid political noise
“people should focus on the fundamentals and try to... Stay clear from the political noise”
Listen at 10:42
Global corporate earnings growth will remain solid into 2027
“This earnings growth dynamics are going to remain solid into 2027”
Listen at 11:49
Solid earnings growth will support continuation of the equity bull market
“this is the backbone of an equity bull market that should continue”
Listen at 11:55
Equities should rise in the U.S., emerging markets, and Europe
“equities should trade higher in the US. but also ex-US, including emerging markets and Europe”
Listen at 12:06
Short- and intermediate-term fixed income offers investment opportunities
“there's opportunities to take advantage of in the short, to intermediate segments of global curves”
Listen at 12:26
Investors should be cautious on longer-term bonds because fiscal dynamics are challenging
“We are a little cautious on the longer end of the curves given fiscal dynamics in Brazil, in the U.S., in so many places being so challenging”
Listen at 12:34
Commodities remain attractive investments
“Commodities is an area that we continue to view positively”
Listen at 12:42
Demand for copper, aluminum, gold, oil, and gas will remain strong
“We think demand dynamics for copper, aluminum, gold, oil, gas will continue very strong”
Listen at 12:46
Emerging markets are an effective portfolio diversifier
“It's a great diversifier”
Listen at 12:59
Emerging-market dollar bonds offer quality issuers and appealing yields
“you're getting high-quality issuers, and you can collect an appealing yield on emerging markets, dollar-denominated bonds”
Listen at 13:14
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Weekly email
State of the Pod, every Monday
The week's most-discussed names and stories from podcasts, with the moments behind them. Free, five minutes, unsubscribe in one click.