The Brazilian investor’s prospects may improve starting in 2026 due to lower interest rates and positive changes in the fiscal framework, despite upcoming elections in the following year.
Rogério Xavier, the founder of SPX Capital, stated during the 26th Santander Conference that there is a high likelihood of a shift in Brazilian economic policy regardless of the 2026 election outcome.
Whenever a problematic situation arose in the country, the manager always found a way to resolve the tax issue. The manager expressed uncertainty about maintaining the current economic policy direction even if the same government remained in power after 2026.
Xavier highlights that in the past, when there was a shift towards increased fiscal pragmatism, the assets were significantly appreciated.
The SPX partner believes that the increasing debt levels signal the need for a change in the country’s model to avoid a trust crisis and asset devaluation. The debt/GDP ratio will be crucial for Brazil’s future direction, requiring tough decisions from the elected leaders.
The decline in the Selic rate benefits risky investments.
The Central Bank may start reducing interest rates between late 2025 and early the following year, depending on the Federal Reserve’s decisions.
Torós, a former director of monetary policy at the BC, stated that he thinks the Brazilian monetary authority is likely to be more patient and may wait until early 2026 to implement cuts, unless the Fed cuts interest rates twice before then.
A decrease in the Selic rate at the start of autumn, combined with a similar interest rate trend in the US, significantly impacts the prices of key assets. Investors are likely to foresee increased stock market potential due to anticipated lower financial costs and the positive effects on a lower interest rate economy, alongside a forthcoming decline in fixed income returns.
Trump’s risk is frightening.
Investors may have positive prospects in 2026, but there are uncertainties in the near and medium future, largely due to President Donald Trump’s actions against Brazil.
Luiz Stuhlberger, CEO and CIO of Green Asset, believes that the worst of Trump’s tariffs is over. However, he is concerned about other factors, such as the big tech restrictions agenda, which could be seen as a move against US economic interests by the American government.
If retaliations escalate, resources may leak from the country, leading to a rise in the dollar and inflationary pressures. In a highly turbulent situation, the central bank may need to maintain interest rates at elevated levels for an extended period of time.
The potential impact of Trump could also affect Stuhlberger’s outlook in the medium and long term. “I believe it poses a significant risk to future valuations and our current investment strategies.”
An event that could significantly heighten global uncertainties is the transition at the Federal Reserve. The concern lies not just in the identity of the next chair of the Federal Reserve, but also in the government’s perspective on monetary policy. Trump’s belief is that paying any interest amounts to wasted money, and as the world’s debtor, he will pay interest as he sees fit.
Stuhlberger advised investors to get ready for a potentially turbulent time in the markets, as the new Fed might lower interest rates considerably, possibly nearing zero. He emphasized the importance of considering non-currency assets as a means of protection.
Green’s manager mentioned real estate, company shares, gold, and Bitcoin as assets for protection, expressing confidence in their value appreciation despite the world not fully recognizing it yet.
Euro compared to the dollar
Investing in the euro as a means of protection against uncertainties due to the current tariff war and geopolitical risks can present Europe as an opportunity to diversify portfolios, according to Xavier from SPX. Germany, with fiscal space and a commitment to enhancing military power and productivity, offers potential for increased spending in the region.
The manager mentioned that the European Commission indicated the possibility of allowing the eurozone member countries to jointly issue eurobonds, which are currently issued individually by the governments in the monetary union.
The suggestion is to introduce a fundraising system based on roles where all members are assured of their responsibilities simultaneously. This way, countries would take on commitments according to the resources they will receive in the operation.
The euro could potentially emerge as a strong alternative to the dollar if implemented on a significant scale. This presents a valuable opportunity for Europe to capitalize on.
