Brazil heads to the polls this Sunday, and the markets are telling two different stories. The sitting President Luiz Inácio Lula da Silva is favored to finish first, but his challenger, Flávio Bolsonaro is favored to ultimately win the presidency.
How does that work?
In Brazil, finishing first is not enough. Unless someone wins more than half of the votes, the top two face off again three weeks later. So while Sunday could crown a winner, it could also set the stage for an even closer showdown.
Let us get into it.
For informational purposes only. Not trading advice. See full disclaimer below.
First-round winner
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On Sunday, October 4th, Brazil will be voting in the first round of Brazil's presidential elections. The election is essentially between the two candidates Lula and Flávio Bolsonaro.
Lula represents the leftist Workers' Party and is seeking reelection for what would be his fourth term. Flávio is the son of former president Jair Bolsonaro and represents the Liberal Party (which is actually Brazil's main conservative party) looking to continue his father's legacy.
To keep it simple, Lula represents the political left, and Flávio the right.
As it stands now, our markets are giving Lula a 74% chance of winning the first round.
To be clear, this does not highlight what percentage of the vote he will obtain, just the odds of him leading in round one.
Flavio is likely to be a close second.
There are a number of other candidates that will be on this first round ballot, and their inclusion is ultimately affecting the total number of votes the leading two candidates will receive.
Will Sunday settle it?
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The reality is, that finishing first in round one and winning outright are two very different things. The graph above highlights the likelihood that any candidates will outright win round one by receiving over 50% of the overall vote.
As a reminder, if this was to happen, that candidate would immediately win the election, and no second round would be held. But as you can see, the odds of this happening are very slim at 3.9%. Ultimately, this means we are very likely to see a second round with only Lula and Flávio on the ballot.
The race behind the race
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Now we have spent a lot of time talking about the two leading candidates, but to get a better overall picture of the election, we should take a look at the candidates that are likely to come in third place in the first round of voting.
That may seem silly, as third place candidates do not get to advance. But remember, whoever voted for them in round one will only have two candidates to pick from in round two. This means that a lead in round one could flip drastically in the second round.
Kalshi markets are predicting that Renan Santos will come in third in round one. This is pretty significant since Renan represents the anti-establishment right. He has actively criticized both Lula and Flávio.
There are many Brazilians whose leading concerns are crime, cost of living, and inflation. These voters have been pulled to the right, but many of them have been reluctant to support Flávio, whose father (and former President) is under house arrest for attempting to start a coup in 2022 when he lost reelection.
So the question is, assuming Santos doesn’t pull off an upset and advance, where will his voters turn in round two?
Who gets the presidency?
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The overall winner of the 2026 Presidential election is much less clear. Lula may have been leading in the first round of votes, but Kalshi markets actually predict that Flávio will win the overall election.
The market is giving Flávio a 57% chance of winning, to Lula's 44%. So what's happening here?
Well as we discussed in the previous section, a number of the candidates on the ballot in round one appeal to right-leaning voters. Once those candidates are off the ballot, those voters will be forced to pick between Lula and Flávio. If they are unhappy with Lula's current presidency and want to see more right-wing policies, they may break toward Flávio in the second round.
If you are interested in any other Brazilian Election markets, you can check them out here. We hope you have a nice weekend.
Follow Jack Kuveke at Jabroni Capital
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