POLL-Brazil stocks to keep advancing on expected interest rate cuts

By Gabriel Burin

BUENOS AIRES, Nov 26 (Reuters) - Brazil's stocks will advance unhindered into the start of 2026 before facing a likely increase in volatility as next year's presidential vote comes closer, a Reuters poll showed.

Sao Paulo's Bovespa stocks index .BVSP recently climbed to a record high of 157,749 points following a solid performance in the last few months.

The winning streak is set to continue on prospects of another interest rate cut in the United States and the expected start of a policy easing cycle in Brazil next quarter, market specialists said.

The Bovespa index is seen at 162,000 points in mid-2026 or 4.3% higher than 155,278 on Monday, according to the median estimate of 11 stock market strategists polled November 13-25.

"The positive flow backdrop, driven by the expected Fed rate cuts and the anticipated start of the easing cycle in Brazil ... should continue to support equities," said Ilan Arbetman, an analyst at Ativa Investimentos.

ELECTION VOLATILITY LOOMS

For the end of next year the Bovespa is forecast at 175,000 in a bigger sample of 15 respondents. However, many noted developments in the race to October's presidential vote could weigh on this optimistic outlook.

"The 2026 elections are a potential source of higher volatility later on, but it is still too early to incorporate specific candidate-driven scenarios," Arbetman added.

Politics aside, Brazilian stocks that remain cheap in terms of relatively low price/earnings ratios should keep attracting foreign investors in coming months.

Potential campaign proposals to lower the country's corporate taxes may represent an extra catalyst, as well as any additional relief from U.S. tariffs.

Yet, stock gains could dissipate if future interest rate cuts fall short of expectations, poll participants said.

Meanwhile, Mexico's IPC stock index .MXX is expected to rise 8.7% to 67,950 points at the end of 2026 from 62,523 on Monday.

This positive outlook is based on expectations of a renewal of the USMCA trade deal next year. Still, some market players are turning more skeptical.

"USMCA (negotiations) will be more complicated than what is expected by investors and we see a bias toward our bear case vs our bull case," Morgan Stanley analysts wrote in a report last week.

"Calibration and alignment (of any deal) are the key to ensure Mexico is a China Buffer, not a bridge (but it is) too early to make that call," they added.

So far in 2025 Brazil's Bovespa index is up 29.1%, approaching a 31.6% annual increase in 2019. Mexico's IPC index has gained 26.3% year-to-date, on course to log its best performance since 2009.

(Other stories from the Reuters Q4 global stock markets poll package)