Lula’s election win leaves Brazil facing a fiscal tightrope

Presidential candidate and incumbent president Luiz Inacio Lula da Silva of Brazil celebrates after the results of the general election day on October 25, 2026 in Sao Paulo, Brazil.Rodrigo Paiva | Getty Images News | Getty ImagesLuiz Inácio Lula da Silva's surprise re-election as Brazil's president on Sunday prompted a sharp market reaction — and showed the tightrope he must walk between pleasing his grassroots base and nervous investors who could fuel a fiscal crisis.The country's benchmark stock index tumbled 13.9% on Monday, the sharpest daily decline since the start of the COVID-19 pandemic, and the Brazilian real fell nearly 8% against the U.S. dollar, the most since 1999.The yield on Brazil's 10-year government bond rose 2.46 percentage points to its highest level in more than a decade. The moves wiped out a rally in Brazilian assets that followed Flávio Bolsonaro, seen as the more market-friendly and fiscally disciplined of the candidates, winning the first-round vote in early October.Lula, who has been in office since Jan. 1, 2023 and was president before from 2003 to 2011, now faces a host of challenges, including a heavily right-wing Congress opposed to many of his polici...