GOOD AND HARD, BUT IN BRAZILIAN PORTUGUESE: Brazil has voted for economic chaos.

The shift to the right across South America has been stopped. One of President Trump’s key regional allies has been defeated. The global left, and most of the center, has been celebrating the victory of President Lula over Flávio Bolsonaro in a closely fought election this weekend. There is just one problem. As the brutal sell-off of financial assets demonstrated, Brazil has also voted for economic chaos. That rarely ends well.

While the left were toasting victory on Monday morning, investors were furiously dumping Brazilian equities and, more importantly, debt. On Monday the Bovespa – Brazil’s main stock market index – fell by over 15 percent. The Brazilian real lost as much as a tenth of its value, its worst trading day since 1999. Meanwhile, the ten-year local bond yield jumped from 13 percent to more than 15 percent in a single session. Amid the rout, the country canceled two debt auctions. It was ugly, and shows little sign of calming down any time soon.

In reality, the sell-off made perfect sense. Investors had anticipated a Bolsonaro victory, and were expecting lower taxes, controls on spending and pro-business reforms once their man took power. They had positioned their books accordingly, confidently expecting a post-election rally. After all, on the night before the election, the prediction markets, which are increasingly taken as gospel on Wall Street, gave the right an 80 percent chance of victory. As that prospect of that disappeared, they reversed all those trades as quickly as possible.

And speaking of reversing course: Wow! Flavio Bolsonaro Escapes Brazilian Regime with Family, Headed to FL as Trump Offers Protection.