Brazilian stocks jumped because Bolsonaro became the favorite to win. Traders acted like this was new information. The first round of voting happened on Sunday. Everyone with a calendar knew this election was coming.
The runoff is scheduled for October 25th against incumbent Lula da Silva. That's three weeks away. Brazilian equities moved on the possibility that one guy might beat another guy in a contest that was already happening. This is what passes for actionable intelligence in 2022.
Technical analysts have been saying the same thing for months. The charts don't care who wins. The moving averages don't read polling data. The 200-day simple moving average has no opinion on Brazilian political reform. It just sits there at whatever price level math says it should sit at.
But retail traders needed a story. They needed to feel smart about clicking the buy button. So they read that Bolsonaro was now the "heavy favorite" and decided this was their moment. Never mind that being a heavy favorite in a two-person race means you have like a 60% chance of winning. Flip a coin twice. That's your edge.
The fundamentals people will tell you this matters for monetary policy and fiscal discipline and commodity exports. They'll build spreadsheet models with sensitivity tables. They'll host conference calls. None of them will beat the index.
The news writers need you to believe Brazilian election results are actionable intel that arrived just in time for you to profit. They need you to think reading their summary gave you an edge over the guy who didn't read it. That guy also lost money, he just didn't pretend it was for sophisticated reasons.
Your stop-loss doesn't care about Brazilian democracy. It triggers at the price you set regardless of who wins in São Paulo.
Photo by Matheus Câmara da Silva on Unsplash
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