The global financial market is currently experiencing a sharp contrast between international resilience and local uncertainties. While US equity markets continue to refresh historic highs—with the S&P 500 hitting a new record of 7,539 points driven by robust corporate earnings—the Brazilian market is operating under heightened volatility, pressured primarily by the upcoming electoral scenario and lingering doubts over the country’s fiscal trajectory.
This assessment comes from Gabriel Timm, investment manager at Trio, who views the current economic environment as a complex blend of geopolitical tensions, elevated interest rates, and a global reallocation of capital. “The war has lasted longer than the market initially priced in, but US markets absorbed this noise with greater-than-expected resilience, heavily supported by an extremely strong corporate earnings season,” Timm states.
In the foreign exchange market, the behavior of the dollar has drawn significant investor scrutiny. The Brazilian Real has been one of the top-performing currencies in the G20 in 2026 amid the Middle East conflict Although the US dollar [INDEXICE: DXY] strengthened temporarily as conflicts escalated, the structural trend remains one of global weakening.
In Brazil, however, the currency dynamic developed unique characteristics. “Against the real, the dollar has consistently lost ground, primarily due to the wide interest rate differential and Brazil’s status as a net commodity exporter,” Timm explains. The appreciation of the real was also bolstered by crude oil prices [ICE: BRENT] holding near the $100 per barrel mark, which favors commodity-exporting nations like Brazil.
Nevertheless, the fund manager warns that the environment still carries substantial risks. “Elevated oil prices keep critical risks alive for the global economy, such as persistent inflation, pressure on corporate margins, and a reduction in the expected profitability of investment portfolios,” he highlights.
See also: Brazilian Real (BRL) Surges as Top-Performing G20 Currency Amid Middle East Conflict
Brazilian Equities Lose Steam
While the S&P 500—representing a theoretical portfolio of the 500 largest publicly traded companies on the NYSE and NASDAQ—renewed historic records near the 7,550-point mark, the Brazilian market presented the opposite behavior. After recently approaching the 200,000-point milestone, the Ibovespa (IBOV) retraced to the 180,000-point range, with an even harsher impact on small-cap companies. The iShares MSCI Brazil ETF (NYSE: EWZ) , widely considered the US-dollar proxy for the Ibovespa, mirrored this downturn, dropping 11% after hitting a five-year high of $41 in late April.
“Foreign capital inflows lost intensity. Part of this happened because strong US corporate earnings lured global capital back, draining resources that had previously been migrating to emerging markets,” Timm notes.
According to the specialist, the domestic landscape has also begun to be heavily influenced by the upcoming Brazilian elections. The investment manager believes the evolution of the political environment will be the deciding factor for interest rates, foreign exchange, and stock performance in the coming months. “Fiscal outlook improvements depend directly on political developments. If a candidate more aligned with market-friendly economic agendas gains traction in the polls, we will likely see a recovery in confidence and a compression of real yields,” says Timm.
As fiscal health becomes the focal point of business news ahead of the election, events —such as Flávio Bolsonaro Drops 14 Points, impacting the Brazilian Real and Stock Market—are gaining relevance. As “pro-market” candidates gain or lose traction in the news cycle, it highly impacts interest rate expectations and the ability of companies to raise capital.
Today, Brazil holds one of the highest real interest rate levels in the world. While this environment attracts investors to fixed income, it pressures leveraged companies and limits equity upside. “At the beginning of the year, the market projected a terminal Selic rate—the Brazilian equivalent to the US Federal Funds Rate—close to 12% for the end of 2026. Now, we are already seeing consensus projections climb to 13% or 13.5%, which directly impacts valuations, capital costs, and broader economic activity,” he explains. According to the manager, reducing this risk premium hinges entirely on the perception of post-election fiscal responsibility.
Brazil—which was one of the first countries to hike interest rates after the 2020 COVID pandemic—continues to navigate a scenario of high interest rates of 10%+ annualized since 2022, yet has managed to maintain economic growth throughout this period.
Fixed Income Remains Attractive
Given the current macroeconomic backdrop, Timm advocates for allocations in inflation-linked bonds, particularly long-term NTN-Bs —Brazilian government debt backed by inflation, similar to US TIPS.
“NTN-Bs continue to offer historically high real premiums, nearing levels seen during deep crises in the Brazilian economy. Yet, the current macroeconomic reality is significantly better than what was observed in past downturns,” he assesses. Today, NTN-Bs are priced at a highly attractive 7.82% + Inflation for the earliest maturities (2032) and roughly 7.00% + Inflation for the longest maturities (2040–2055). According to the manager, these papers offer substantial long-term real gains and still carry additional upside potential if the fiscal environment improves after the elections.
For Gabriel Timm, the current market juncture demands a careful reading of macro data and strategic diversification. “The environment remains challenging, but it is also full of opportunities. Investors must realize that interest rates, politics, and geopolitics are more interconnected than ever. The ability to adapt will be decisive in the coming months,” the specialist concludes.
About Trio Financial Group Founded in 2020 by Peterson Ferreira dos Santos and Manoel de Oliveira Souza, entrepreneurs with extensive backgrounds in technology and financial markets, Trio Financial Group was established to provide a robust financial infrastructure capable of scaling alongside corporate growth. A key differentiator for the firm is its heavy investment in proprietary technology and advanced financial infrastructure. Trio develops tailored solutions specifically for the B2B corporate environment, highlighting cash management tools, API integrations, streamlined reconciliation systems, and Pix-based solutions.
