JPM Brazil Equity Strategy

J P M O R G A N Global Markets Strategy 20 September 2026

Brazil Equity Strategy A Different Playbook? Market Performance on Elections

Brazil is the best performing EM over the past month as polls started to narrow Co-head of Emerging Markets Equity showing the potential for an opposition win in the October elections. As we have Strategy and Head of LatAm and emphasized in our 2H outlook, global factors usually do most of the heavy lifting Brazil Strategy in LatAm, but sometimes — especially during elections — local factors can take Emy Shayo Cherman AC the driver’s seat. When that happens, the move is typically greater than from global ( beta alone. Taking into account Polymarket and the MSCI Brazil since July 1 — Banco J.P. Morgan S.A. when Flavio bottomed — the market rose by 0.25% on average each day that Cinthya M Mizuguchi Flavio gained in the polls. However, this variation has been increasing, as per ( the table below: Banco J.P. Morgan S.A. Figure 1: MSCI Brazil average performance Figure 2: Flavio Bolsonaro’s odds of winning Diego Celedon on days Flavio’s odds of winning rose (as per versus MSCI Brazil ( Polymarkets) Month Average daily MSCI move 2000 55 Inversiones J.P. Morgan Limitada Since July 1, 2026 0.20% 1950 50

July 2026 full month 0.08% 1900 45 Adrian E Huerta 40 August 2026 full month 0.10% September 2026 MTD 0.72% Jul-26 Aug-26 Sep-26 20 J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. MSCI Brazil Odds of Flavio Win (right) Morgan Grupo Financiero

Source: Bloomberg Finance L.P.; J.P. Morgan. As of Sept 15. Source: Bloomberg Finance L.P.; J.P. Morgan.

This performance is atypical for election periods. As we have emphasized in several reports, Brazil hasn’t usually done well in both relative and absolute terms during elections. On the other hand, it has generally rallied in the month of the election (October). The question is whether this “better performance” going into the election is likely to result in a lesser rally during the election (October). We look into the past elections and the one that seems the most similar in terms of setup and market pricing is 2014 (Dilma x Aecio). Equities had a small decline and a small rebound following the first round.

Table 1: Deeper selloffs before an election tend to produce large rallies in the month of the election – Opposite is also true

Source: Bloomberg Finance L.P.; J.P. Morgan.

This might not be 2014: There is an important difference relative to 2014 which could lead to greater upside in the month of the election. The winner of the election would be the opposition and not the current government. Also, the upside could also appear earlier with a Senate that is more conservative and a significantly different advantage for the opposition in the first round relative to what would be expected going into the race. The stable post-election scenario of 2014 could apply if policy remains as is. If there is a policy shift to greater fiscal discipline, the upside could be higher, in our view.

See page 4 for analyst certification and important disclosures, including non-US analyst disclosures.

Banco J.P. Morgan S.A. Global Markets Strategy Emy Shayo Cherman AC 20 September 2026 JPMORGAN (

Exploring valuation equilibria in macro-political scenarios. We have been running the exercise below every electoral season since 2014. We distribute the 12-mo-fwd P/E of the past 10 years into quartiles and attribute to each of them a macro/political “scenario”: Crisis, Deterioration, Improvement and Structural Fix. Today, with a 12-mo-fwd P/E of 8.6x, the market is trading between the deterioration and improvement scenarios, which makes sense to us considering the uncertainty at hand. Still, it is a lot closer to the deterioration one. If one were to move to an improvement scenario, that would imply upside of 28% to the MSCI Brazil from current levels. A structural fix would bring implied upside of 54%, with the average P/E moving to 13.3x, last seen in 2020.

Figure 3: Average consensus forward P/E in Figure 4: Implied re(de)-rating outlook for equities quartiles over the past 10 years in four different macro/political equilibria 14 60% 54% 50% 12 40% 28% 10 30% 8.6x 20% 8 10% 13.3x 6 0% 11.1x…