Two Elections in the Americas—and Spain’s Coming Snap Vote

Editors’ Note: MarketMinder favors no politician nor any political party. Our assessment of elections and political matters solely aims to identify potential market effects.

With US midterms a month away, political uncertainty is poised to fall, likely revealing bullish gridlock in its wake. Happily, this isn’t just a US-only tailwind. It extends globally, thanks to high correlations between US and non-US markets. Falling uncertainty elsewhere should add to the party, too, as three fresh developments highlight.

Another Spanish Snap Election

Three years ago, Spanish Prime Minister Pedro Sánchez called a snap election after his center-left Socialist Party got trounced in local elections. It was a calculated risk, with the Socialists flagging in polls, but he bet divisions among right-leaning parties would be big enough for his minority government to squeak through. It worked, extending his gridlocked administration. Now he is attempting a sequel: Monday he called a snap election for November 29.

To us, this looks all about timing. Spain’s next vote was due by August, and Sánchez’s Socialists’ polling remains dim. The center-right Popular Party leads, and the right-wing Vox is gaining ground. But elections are about issues and campaigns, not long-term poll trends, making it critical to find the right opening. Sánchez is betting he has found one in an 87-year-old Madrid resident who was evicted from her apartment after developers purchased it. The saga went viral, sparking protests. In response, Sanchez tabled emergency housing measures, including a temporary eviction ban and other tenant protections. Right-wing parties shot those measures down last Friday, arguing only home construction can make housing more affordable.

We think that argument is right, economically. But it is a tough sell politically, giving Sanchez his wedge issue for a snap campaign. Whether it will be enough to overcome weak polling, time will tell.

However this goes, investors will soon get clarity … nine months early. Investors will probably also get more gridlock, given the next government will either be a multiparty coalition, a minority administration or both, since there are so many small parties. This helps sand down or block radical proposals, keeping legislative risk low and freeing businesses to invest. Additionally, it quells common Spanish fears of extreme right or left governments, a source of relief. Headlines focus on personalities, but markets care about policies and smile when there isn’t much change. Spanish stocks show this, nearly doubling MSCI World Index returns since the last election. Granted, Spanish banks’ banger 2025 deserves much of the credit, but they weren’t the only hot sector. Trust the market. 

Brazil’s Surprise

Entering Sunday’s first-round presidential vote in Brazil, polling put left-wing incumbent Luiz Inácio “Lula” da Silva 3 points ahead of right-wing challenger Flávio Bolsonaro (son of former president Jair), 45 – 42. But voters delivered a surprise: Bolsonaro took 47.3% of the vote, beating Lula’s 44.8%.^[i] With neither winning an outright majority, they head to an October 25 runoff. Bolsonaro looks to have pole position, given smaller right-wing parties mostly split the rest of the vote. Right-leaning parties also gained seats in legislative elections, indicating broad momentum.

Headlines naturally focus on the personalities and deep enmity between the two candidates, framing the contest as a grudge match. There is also plenty of handwringing about populist policies on both sides. But Brazil is no stranger to left-wing and right-wing populism. It is the political norm. Stocks are used to it. Neither side has proven inherently bullish or bearish for stocks there (as elsewhere globally). Instead, politics tend to run in the background while commodity prices and economic fundamentals drive returns in the natural resource-heavy market.

This can be hard to see when stocks react to political surprises, as Brazilian stocks did with an 8% surge Monday in reais (13% in USD).^[ii] But don’t read into it. Brazilian stocks started rebounding from midyear weakness in mid-August, so Monday’s rise is more of a trend, not a shift. Two, because right-leaning candidates tend to run on pro-business platforms, they get investors’ hopes up, and markets pre-price it. Monday’s jump fits that profile. It is a one off, not a sign of more to come. Penciling in big returns because of pro-business talk risks falling prey to bias. And it risks disappointment if that talk doesn’t turn into policy.

From here, as the candidates squabble and headlines obsess over polls, more volatility won’t surprise. Uncertainty has that effect. But the second-round result should bring clarity. Investors will know whether Lula or Bolsonaro will preside over a deeply fragmented legislature, which looks far more gridlocked than loose references to a “right-wing Congress” imply. Bloomberg’s analysis gives pro-Bolsonaro parties 121 of 513 lower-house seats, with 124 pro-Lula and 268 unaligned.^[iii] Similar math reigns in the Senate. Many of those unaligned may be right-leaning, but policy consensus can be difficult even when lawmakers have loose ideological overlap. As investors gradually fathom this, politics can drift back into the structural backdrop and markets can move on.

Gridlock Wins in Quebec

Last but not least, Quebec held provincial elections Monday. The separatist Parti Québécois (PQ) “won,” raising independence chatter. Before the vote, party leader Paul St-Pierre Plamondon pledged to hold an independence referendum after US President Trump leaves office in 2029, presuming eased tariff tremors will stabilize the local economy by then. On paper, some say, Monday’s results make this likely, setting up years of uncertainty.

Hold on. The PQ won a plurality but took just 59 of 127 provincial legislative seats (per the preliminary results). It would head a minority government. Staying in power for a year could be a struggle, never mind the three-plus years to a potential referendum.

Here, too, markets should be able to move on. Provincial gridlock should ease Quebec independence uncertainty for now, clearing one cloud over Canada. More uncertainty should fall later this month, when Albertans vote on whether to hold an independence vote. This doesn’t clear all barriers to Canadian outperformance. Its heavy weighting to natural resources is a big influence on returns, and the US tariff tiff adds to fog. But lower uncertainty and better-than-expected economic results are a fine bull market backdrop.