UBS data shows election volatility averages are below historical norms in Brazil
The UBS analysis found that equity and bond market volatility during the pre-election period in the first quarter does not exceed historical averages, though price directions may shift as markets adjust expectations.
With the Brazilian presidential election occurring just one month away, financial experts are weighing whether investors should hold existing positions or wait for the results. To answer this question, UBS compared annualized quarterly volatility in the stock market, currency, and fixed income during election years against historical data. The study found no consistent pattern of additional stress. In the Ibovespa, average volatility during election years was 19% in the first quarter, compared to 23% for the historical average, and 20% in the third quarter against a 21% historical average. These calculations exclude the periods of 2008 and 2020. Leonardo Mendes, a financial consultant at Manchester Investimentos, agreed with the UBS reading that volatility does not significantly increase. He noted that elections do not necessarily bring more volatility, but rather more directional changes as markets recalibrate expectations for the upcoming government. Pedro Carneiro, a variable income manager at Asset1, added that in September and October, the market's reaction to new information changes rapidly.
