Morgan Stanley cuts Brazil equities to Equal-weight after Lula re-election

The speed of the reversal — an upgrade unwound within weeks — says more about how election outcomes reset the macro risk premium than about any change in fundamentals. The call effectively splits Brazil into two markets: exporters whose earnings benefit from a weaker currency, and domestic names exposed to higher rates and a stalled fiscal adjustment. That split is the real signal for allocators tracking EM exposure. Whether the currency and rate path stabilize, and whether any fiscal rebalancing materializes, is the open question that would determine if this is a tactical reset or a longer regime shift.