Investors are frightened by Lula. But is this fear warranted?

lula markets crissi goldman sachs 2018 election
Lula still strikes fear.

Sixteen years ago, former union leader Luiz Inácio Lula da Silva led all opinion polls – and financial markets went bananas. A Goldman Sachs analyst created the Lulameter, “a model to quantify the probability of a Lula victory that was being priced by currency markets.” Mega-investor George Soros said that Brazil faced a choice between Social Democracy Party candidate José Serra and chaos.

Well, the groundhog hasn’t come out of his den, and it’s 2002 all over again.

Since last week, Brazilian markets have become extremely volatile, as multiple presidential polls showed Lula is still ahead. While the...

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