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Brazilian Election Lifts Leveraged Latin America ETF

This article was originally published on ETFTrends.com.

The Latin America-focused Direxion Daily Latin America Bull 3X ETF (LBJ) closed Monday’s trading session up 12.65% thanks to the first round of Brazil’s presidential election, which saw far-right presidential candidate Jair Bolsonaro take the early lead.

It was a much-needed boost for LBJ, which has been down over 30% year-to-date, but up 14.17% the past three years. LBJ was hinging upon Brazil's looming presidential election and it responded positively along with the surging  Direxion Daily MSCI Brazil Bull 3X ETF (BRZU) , which was up 20.4% by the closing bell.

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The election was slated as a tight race between five candidates with no clear-cut favorite--Bolsonaro of the Social Liberal Party, Ciro Gomes of the Democratic Labor Party, Geraldo Alckmin of the Brazilian Social Democratic Party and Fernando Haddad of the Workers' Party. However, Bolsonaro gained a better-than-expected 46.7% of the votes on Sunday with Fernando Haddad coming in second with 28.5%.

Like U.S. President Donald Trump in 2016, Bolsonaro was billed as the wild card candidate who was a departure from political norms.

“I voted for Bolsonaro because I’m tired of politicians being the same,” said Maria Aparecida de Oliveira, a 63-year-old housekeeper. “Even if he is a little crazy, someone needs to bring change.”

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In addition to rising crime rates and corruption scandals, the economy is on the minds of Brazilian voters as the country's economy has been slow to recovery after it experienced its worst recession to date. Unemployment levels remain high with double-digit figures and the country is drowning in public debt--74% of Brazil's GDP.

While the annual GDP growth has posted positive gains as of late, it's still not at a level where economists are optimistic about the future growth prospects. The idea situation to address Brazil's current financial woes is to elect a president who is market-friendly to help stymie the issues by effecting policies that favor economic expansion and growth.

With a much-needed shock to its political system, Bolsnaro could be the solution that Brazil needs and if his policies, if elected, materialize in an improving economy, LBJ and BRZU will benefit.

“Bolsonaro is a strange phenomenon,” said Lucas de Aragao, director of Arko Advice, a political risk company in Brasilia. “It’s very hard to understand his movement, the why, the how. It doesn’t have any precedent in Brazil. Even some Lula voters are turning to him. It’s happened because Brazil loves this idea of a savior, of a hero. And Bolsonaro now represents this image of a savior as much as Lula does.”

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