Well, that was a trade that did not work out. XP Inc. (XP) shares are plunging on Monday following the Brazil elections after Brazilian President Luiz Inácio Lula da Silva secured another term, defeating Sen. Flávio Bolsonaro and overturning investor expectations of a rightward political shift following the first round three weeks ago.

The election outcome also deepened the political rift between Latin America's largest economy and U.S. President Donald Trump.

Meanwhile, Nasdaq futures rose 0.51%, while S&P 500 futures gained 0.47%. So this is a Brazil story, not a global risk-off story.

Brazilian Markets Face Sharp Reversal After Lula's Victory

Brazilian assets came under pressure after the election result. The Tokyo-listed Nomura NF Ibovespa Link ETF, which tracks Brazilian equities, plunged as much as 16% in Japan, marking its steepest intraday decline since 2020. November futures for the Brazilian real fell roughly 10% during Asian trading hours, according to the Economic Times.

The sell-off followed a recent strong rally in Brazilian markets. Bolsonaro's unexpected first-round lead three weeks earlier had boosted expectations of business-friendly reforms and tighter fiscal policy.

Brazil's benchmark Ibovespa index climbed 12% over the past month, while the real strengthened nearly 5% against the U.S. dollar. Interest-rate futures also reflected expectations that tighter public finances under a Bolsonaro administration could create room for lower borrowing costs.

What Is Driving XP Stock Lower?

Lula defeated Bolsonaro in Brazil's presidential runoff on Sunday, surprising investors who had anticipated a victory for the right-wing candidate.

Investors had expected a Bolsonaro administration to pursue business-friendly reforms, rein in government spending and support privatization.

Lula's victory has prompted investors to reassess those expectations, contributing to a broader sell-off in Brazilian equities.

Investors Brace for Volatility as Fiscal Uncertainty Returns

According to Reuters, investors had positioned for a right-wing victory, bringing Lula's fiscal plans back into focus. Interest-rate futures also reflected expectations that tighter fiscal policy under Bolsonaro could have created room for lower borrowing costs.

Investors are now watching Lula's fiscal plans and his choice of finance minister for signals about the country's spending and public-debt outlook.

Luis Felipe Vital, head of macro strategy at Warren Investimentos, expects significant market volatility on Monday. He said asset selloffs and interest-rate futures could hit their upper trading limits shortly after the market opens.

Alejo Czerwonko, chief investment officer for emerging markets at UBS Global Wealth Management, said the rally following the first round could largely reverse, leaving market sentiment weak until a clearer fiscal plan emerges.

Investors want campaign-related spending to end and a credible plan to stabilize public debt, Czerwonko said. He added that cooperation with an opposition-leaning Congress would be critical to advancing any fiscal measures.

What Is XP? Brazil-Focused Brokerage Revenue Model

XP is a Cayman Island-based technology-driven financial services platform focused on Brazil, offering low-fee financial products and services.

It primarily evaluates the business as a single operating segment, which means investors often focus on overall client activity and platform economics rather than separate business-line reporting.

The company generates a large portion of revenue through brokerage commissions, with Brazil representing its biggest market.

XP Earnings Preview and Analyst Price Targets

Looking further out, the next major catalyst for the stock arrives with the November 16, 2026 (estimated) earnings report.

• EPS Estimate: 53 cents (Up from 45 cents YoY)
• Revenue Estimate: $976.77 million (Up from $855.49 million YoY)
• Valuation: P/E of 15.1x (Suggests fair valuation relative to peers)

Analyst Consensus & Recent Actions: The stock carries a Buy rating with an average price forecast of $31.75. Recent analyst moves include:

• UBS: Buy (Raises Target to $37.00) (Oct. 8)
• JP Morgan: Overweight (Raises Target to $38.00) (Oct. 6)
• Itau BBA: Upgraded to Outperform (Target $27.00) (Oct. 6)

XP Price Action: XP shares were down 51.43% at $14.77 at the time of publication on Monday. The stock is trading at a new 52-week low, according to market data.