Brazil election jitters push investors to trim carry-trade exposure

Election concerns are beginning to weigh on Brazilian markets, prompting global investors to reduce exposure to one of 2026’s strongest carry trades.

Asset managers including VanEck, Vontobel, and Aberdeen have started trimming Brazilian positions as uncertainty builds around the presidential race. The shift reflects concern that political volatility could erode the returns investors have earned from holding high-yielding Brazilian assets.

Brazil’s carry trade has benefited investors who borrowed in lower-yielding currencies to buy local assets, but the strategy becomes less attractive when exchange-rate swings and hedging costs rise. A tighter election contest is now increasing the risk around the real, government bonds, and equities.

Investors are watching the campaign for clearer signals on fiscal policy and the direction of the economy. Until the race becomes more predictable, some managers are choosing to lock in gains and reduce exposure rather than absorb additional election risk.

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