Brazilian markets react to election worries as investors reduce exposure

Brazil’s famous carry trade, long a magnet for yield-hungry investors willing to stomach emerging market risk, is losing its charm. With the country’s October 2026 presidential election drawing closer and polls showing a tightening race, some of the biggest names in global asset management are quietly heading for the exits. VanEck, Vontobel, and Aberdeen have all begun trimming their Brazilian exposure in recent weeks, a coordinated retreat that speaks volumes about the market’s growing anxiety over what could be a volatile and unpredictable electoral cycle. The carry trade unwind VanEck’s David Austerweil and Eric Fine are now avoiding Brazilian local fixed-income assets altogether, citing rising election risks as the primary reason. Vontobel’s Thierry Larose has taken an underweight position on the real. Aberdeen’s Kieran Curtis is trimming BRL exposure too, pointing to what he describes as a limited downside cushion, meaning there isn’t enough margin of safety to justify staying fully invested. The election equation Brazil’s first-round presidential vote is scheduled for October 4, 2026, with a potential runoff on October 25. The poll registration deadline falls on August 15, 20...