Brazil Goes To A Runoff On October 25: Why Brazilian Equities Are Moving, And The Only 3X/-3X On EWZ
No candidate won more than 50% of the valid vote on October 4, so Brazil’s presidential race goes to a runoff on October 25. BRZL and BRZD are the only US-listed products designed to provide 3X and -3X daily exposure to EWZ, the iShares MSCI Brazil ETF.
Source: Yahoo Finance, EWZ 5-minute prices, regular sessions of October 2 and October 5, 2026, with October 5 shown through 9:45 a.m. ET. Past performance does not guarantee future results. EWZ is not affiliated with the ETNs and is shown as the reference exposure only.
The iShares MSCI Brazil ETF (EWZ), every five minutes across the last session before the vote and the first session after it.
What Is Going on in Brazil
Brazil voted for president on October 4. No candidate won more than 50% of the valid vote, so the top two candidates meet in a runoff on October 25.
The runoff is between President Luiz Inácio Lula da Silva of the Workers’ Party, seeking a fourth term and Senator Flávio Bolsonaro of the Liberal Party, son of former president Jair Bolsonaro.
In the first round, Flávio Bolsonaro received 47.0% of the valid vote and Lula 45.2%, according to Brazil’s Superior Electoral Court (TSE).1 The race has tightened all year. In November 2025, AtlasIntel’s monthly survey had Lula at 47.3% and Flávio Bolsonaro at 23.1%, a gap of 24 points.2 Brazilian equities have been moving with those numbers. One voting date remains.
Source: Tribunal Superior Eleitoral (TSE), official first-round presidential results, 100% of polling sections counted, accessed October 5, 2026. Shown for context only.
Share of the valid vote by candidate in the October 4, 2026 first round. No candidate reached the 50% needed to win outright.
Why It Moves the Equity Market
Brazil’s central bank sets a policy interest rate known as the Selic. The Selic peaked at 15%, among the highest policy rates in the world before the central bank began cutting in March 2026. Five consecutive quarter-point cuts have brought it down to 13.75%.3 How much further the Selic can fall depends on the next government’s fiscal path. That makes the presidential election directly relevant to the future path of rates, the Brazilian Real and the equity market.
The iShares MSCI Brazil ETF, ticker EWZ, is the reference exposure for our Brazil ETNs. Roughly half the fund is in domestic, rate-sensitive sectors such as banks, utilities, and other companies whose earnings have historically been more sensitive to changes in the Selic (as of September 21, 2026, it held 45 positions, weighted 35.97% in Financials, 15.92% in Energy, 13.02% in Materials and 13.04% in Utilities.4) A cut from 13.75% is a much bigger economic event for a Brazilian bank than it would be for an American one.
Close to 30% of the fund is tied to commodities, primarily oil and iron ore. Those businesses are driven more by global prices than by domestic politics. Those two parts of the portfolio can therefore move for very different reasons, which helps explain why EWZ can have a major move on a day when US equities barely budge.
What The Outcomes Change
The two campaigns offer different fiscal paths. Lula’s program is more consumption-led, with larger social transfers, financed in part by higher taxes on high-income households, foreign dividends, and banks. Flávio Bolsonaro is campaigning on a smaller state, tighter spending and further privatization of state-owned companies.
Neither winner could put that agenda in place alone. Major measures would require congressional approval, and some need constitutional change. Markets do not wait. They reprice the path of spending, the Selic and Real as the odds move. That repricing can run in either direction, and neither the direction nor the magnitude of any move can be predicted.
Why EWZ Jumped After The First Round
The result was not the one the polls pointed to. AtlasIntel’s second September survey had Lula ahead of Flávio Bolsonaro by 2.4 points, 44.1% to 41.7%.2 In the vote, Flávio Bolsonaro finished first by 1.9 points.1 Reuters reported that investors read the result as improving the chances of the program he has campaigned on: tighter public spending, privatizations and lower taxes.5
The rate-sensitive half of EWZ led the move. As of 9:45 a.m. ET on October 5, the US-listed shares of Itaú Unibanco and Bradesco, two of Brazil’s largest banks, were each up about 18% from Friday’s close. Vale, the iron ore miner, was up about 4%. EWZ was up 13%.6
Part of the gap between EWZ and Brazil’s own market is the currency. The Ibovespa, the São Paulo benchmark, was up about 7% in reais, and the real strengthened about 5% against the dollar. EWZ is priced in dollars, so it carries both moves.6
A first-round lead does not decide the runoff. The vote on October 25 is still ahead.
A New Way To Trade It 3X Long or Short
As of October 5, 2026, BRZL and BRZD are the only US-listed exchange-traded products that offer 3X and -3X exposure to EWZ. No other US-listed ETP is built to do that.
The MicroSectors™ Brazil exchange traded notes reference EWZ’s daily share price. BRZL is designed to return +3X that day’s EWZ move before fees and charges. BRZD is designed to return -3X that day’s EWZ move before fees. Both reset at the end of each trading day.
EWZ is the US-listed vehicle most traders already use for Brazil. It trades when São Paulo is closed so the US print is the intraday expression of that market. That is the price these notes are built on. Holding the ETNs is not the same as owning EWZ or Brazilian stocks.
Same catalyst, opposite sides. Each is a single-day trading decision, and neither is intended to be held beyond one trading day.
A 2% day in EWZ is designed to show up as a roughly +6% or -6% in BRZL or BRZD, before fees. A 4% day is designed to show up as roughly +12% or -12%. The 3X and -3X apply to one session. They do not apply to the move from today through the runoff on October 25.
If EWZ rises 2% on Tuesday and falls 2% on Wednesday, the two ETN sessions do not cancel. Each day resets off the prior close, so the path of those two days can leave both the long and the short note worse than a simple 3X of the net move. That is why these are not vehicles for sitting through the runoff. They are vehicles for a view on today’s EWZ print, taken one session at a time, while the runoff is still a live input into that print.
Sources
1. Tribunal Superior Eleitoral (TSE), official results of the first round of the 2026 presidential election, October 4, 2026, accessed October 5, 2026.
2. AS/COA Poll Tracker: Brazil’s 2026 Presidential Election, Americas Society/Council of the Americas, updated September 22, 2026, accessed September 22, 2026. The series plots AtlasIntel monthly national surveys; the September figure is AtlasIntel’s second September survey, conducted September 11 to 16, 2026, with a sample of 5,018 and a margin of error of ±1.0 point.
3. Banco Central do Brasil Copom decisions, as reported by Rio Times Online, September 2026.
4. BlackRock iShares MSCI Brazil ETF fund page, holdings and sector breakdown as of September 21, 2026.
5. Oliver Griffin, Luciana Magalhaes and Marcela Ayres, “Brazil markets expected to jump after Bolsonaro outperforms polls, analysts say,” Reuters, October 5, 2026, accessed October 5, 2026.
6. Yahoo Finance, prices for EWZ, ITUB, BBD, VALE, the Ibovespa and USD/BRL, October 2, 2026 close and October 5, 2026 as of 9:45 a.m. ET.
Risks And Disclosures
Not buy-and-hold. The ETNs are not intended to be “buy and hold” investments and are not intended to be held to maturity. Instead, the ETNs are intended to be daily trading tools for sophisticated investors to manage daily trading risks as part of an overall diversified portfolio. The ETNs are designed to reflect a 3X leveraged long or short, as applicable, exposure to the performance of the applicable Index on a daily basis, before taking into account the negative effect of the fees and charges. However, as a result of the daily resetting leverage, the returns on the ETNs over different periods of time can, and most likely will, differ significantly from three times the return on a direct long or short investment in the applicable Index. The ETNs are designed to achieve their stated investment objectives on a daily basis. The performance of the ETNs over different periods of time can differ significantly from their stated daily objectives. The ETNs are considerably riskier than securities that have intermediate- or long-term investment objectives and are not suitable for investors who plan to hold them for a period of more than one day or who have a “buy and hold” strategy. Investors should actively and continuously monitor their investments in the ETNs on an intraday basis, and any decision to hold the ETNs for more than one day should be made with great care and only as the result of a series of daily (or more frequent) investment decisions to remain invested in the ETNs for the next one-day period. The ETNs are very sensitive to changes in the level of the applicable Index, and returns on the ETNs may be negatively affected in complex ways by the volatility of the applicable Index on a daily or intraday basis. It is possible that investors will suffer significant losses in the ETNs that provide leveraged long exposure even if the long-term performance of the applicable Index is positive. Similarly, it is possible that investors will suffer significant losses in the ETNs that provide short leveraged exposure even if the long-term performance of the applicable Index is negative. Accordingly, the ETNs should be purchased only by sophisticated investors who understand and can bear the potential risks and consequences of the ETNs that are designed to provide leveraged exposure to the long or short, as applicable, performance of the applicable Index on a daily basis and that will be highly volatile and may experience significant losses, up to the entire amount invested, in a short period of time.
Single-country, foreign and emerging market risk. Equity investments involve market risk, including possible loss of principal. Investments tied to a single country or to foreign and emerging markets, such as Brazil, may be concentrated in a small number of issuers, sectors, or industries and can be more volatile than broadly diversified or US investments. They are also subject to currency risk, geopolitical, regulatory and tax risk, and, in the case of emerging markets, heightened political and economic risk and the potential for reduced liquidity. A US-listed fund holding foreign securities trades while its local market is closed, which can widen the difference between the fund’s market price and the value of its holdings. The ETNs also reflect that fund’s own fees and any difference between the fund’s performance and that of the index it seeks to replicate, and any premium or discount between the fund’s market price and its net asset value is magnified by the ETNs’ leverage factor. These risks are amplified in a leveraged or inverse product.
Where to read more. For additional information, including a discussion of the risks relating to an investment in the ETNs, please carefully read the applicable pricing supplement and related documents that we have filed with respect to the ETNs (each, an “ETN Prospectus”). Investors should review the relevant ETN Prospectus carefully prior to making an investment decision. The ETN Prospectus relating to each series of ETNs can be found on EDGAR, the Securities and Exchange Commission (the “SEC”) website at: www.sec.gov, as well as on the product websites at the following links: www.bmoetns.com and www.microsectors.com.
Bank of Montreal, the issuer of each series of ETNs, has filed a registration statement (including a pricing supplement, prospectus supplement and prospectus) with the SEC regarding each series of the ETNs. Please read those documents and the other documents relating to these offerings that Bank of Montreal has filed with the SEC for more complete information about Bank of Montreal and these offerings. These documents may be obtained without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Bank of Montreal, and any agent or dealer that participated in the offering of the ETNs, will arrange to send the applicable pricing supplement, the prospectus supplement and the prospectus if so requested by calling toll-free at 1-877-369-5412.
Credit risk. The ETNs are senior, unsecured obligations of BMO, and are subject to BMO’s credit risk.
Index licensor. The VettaFi Brazil Equity Fund-Tracking Index (the “Index”) is a product of VettaFi LLC (together with its affiliates, “VettaFi”) and has been licensed for use for certain purposes by Bank of Montreal. The ETNs are not sponsored, endorsed, sold or promoted by VettaFi, and VettaFi makes no representation or warranty, express or implied, regarding the advisability of investing in the ETNs or the quality, accuracy or completeness of the Index. VettaFi shall have no liability for any errors, omissions or interruptions in the Index, or for any damages arising from the use of (or inability to use) the Index.
Non-Endorsement. The ETNs are not sponsored, endorsed, sold or promoted by, and are in no way affiliated with, the issuer or sponsor of any fund that the Index is designed to track. EWZ is a product of BlackRock, Inc. and its affiliates (including iShares). The ETNs are not sponsored, endorsed, sold or promoted by BlackRock or iShares, and neither makes any representation regarding the advisability of investing in the ETNs. EWZ and its trademarks are the property of their respective owners.
No political endorsement or forecast. References to candidates, parties, polling and election outcomes are provided as factual background on a scheduled market event, are drawn from the third-party sources cited above as of the dates shown, and are subject to change. Nothing herein constitutes an endorsement of, or a prediction regarding, any candidate, party, policy or election result.
Trademarks and offering. MicroSectors™ and REX™ are registered trademarks of REX Shares, LLC (“REX”). The trademarks have been licensed for use for certain purposes by Bank of Montreal. The ETNs are not sponsored or sold by REX or any of its affiliates or third-party licensors. BMO Capital Markets Corp., an affiliate of the issuer, acts as the underwriter for the offerings of the ETNs. The ETNs are not insured by the FDIC and may lose value.
Suitability. Investment suitability must be determined individually for each investor, and the ETNs are not suitable for all investors. This information is not intended to provide and should not be relied upon as providing accounting, legal, regulatory or tax advice. Investors should consult with their own financial advisors as to these matters.
