After a surprising 33% rise in 2025, Brazil's Ibovespa index is set for further gains in 2026, fueled by presidential elections and expected interest rate cuts. Experts anticipate volatility but an overall upward path. International dynamics and domestic policy shifts will influence the market.
Brazil's stock market surprised in 2025, with the Ibovespa rising 33% from January to December 26, closing at 160,896 points. The index renewed its all-time high 32 times, peaking at 164,455 points on December 4. This exceeded end-2024 median projections of 142,500 points and the accumulated CDI of 13.75%.
Initial pessimism stemmed from expectations of high rates, fiscal deterioration, and the dollar at R$6.20, with inflation potentially reaching 7%. However, the Selic rose to 15%, inflation stayed within the Central Bank's target band, and the fiscal picture did not improve. The surge was more tied to international factors, as foreign investors diversified away from the US amid Trump government turbulences.
For 2026, elections and rate cuts will set the pace. "The presidential elections and the interest rate cut cycle will color next year's economy," says Gina Baccelli, Itaú strategist. Lula is expected to face a market-aligned opponent averse to public spending increases, with debt at 78% of GDP.
Flávio Bolsonaro's candidacy weakened Tarcísio de Freitas, leading to "Flávio Day," with a 4% stock drop and 2% dollar rise. "There's no certainty in an election year except for high volatility," states João Daronco from Suno Research.
Projections are optimistic: Itaú sees 165,000 to 180,000 points, up to 189,000 in the best case; XP forecasts 185,000 as fair value, ranging from 144,000 to 224,000. The Selic is expected to fall to 12%, boosting stocks, which rose 39.2% in recent easing cycles. The market is "cheap," with a P/E of 9 times, below the historical average of 11, versus 23 for the S&P 500. "They are trading today around nine times the expected earnings for the year," says Matheus Amaral from Inter.
