Ahead of Brazil's presidential first round, Wall Street banks have trained staff to physically brace for either a Lula or a Bolsonaro result.
Wall Street desks preparing for Brazil's presidential election have adopted literal airline-style brace positions, one for a Lula win and one for a Bolsonaro win. A runoff brace combining both is in testing. Debbie Downturn reads it as the darkest signal since 1929.
"...and on a Lula result, you tuck your head toward the terminal, never away from it," said Corbin Hale, head of emerging-market crash readiness at Thornvale Capital. He was demonstrating on a carpeted trading floor on Wednesday.
Wall Street has spent the week bracing for two wildly different results in Brazil's presidential vote. Desks no longer mean that as a figure of speech. They have adopted two physical brace positions, one per candidate, copied from airline safety cards.
The Lula brace means leaning forward over your keyboard. The Bolsonaro brace means crossing your arms and staring at a chart of the real, Brazil's currency. Traders must master both before Sunday, because nobody knows which crash is coming. (Both are coming. Only the order is in doubt.)
The full drill has fourteen steps. Step fourteen reads "remain braced." There is no step fifteen, and I have stopped sleeping because of it.
Hale insists this is ordinary risk management. "Every morning, a hedge fund checks its downside," he said. "We have simply made the downside something you do with your spine."
"We have simply made the downside something you do with your spine."
Consider what this signals. Nobody ran brace drills on trading floors before 1929. Nobody ran them before 2008. When the people paid to be calm start practicing the crouch, the floor beneath them is not the bottom. It is a lobby for the basement.
Not everyone shares my dread. Dale Merriwether, a strategist who is long Brazilian stocks, meaning he has bet they will rise, called the drills theatre. "A clear result either way removes uncertainty," he said. "Markets tend to like that." Markets also tended to like tulips, Dale.
The third position
Worse is coming. Brazil holds a runoff if no candidate wins an outright majority in the first round, and some desks are now drafting a runoff brace. It is both positions at once: forward lean, crossed arms, eyes on the currency chart, for several weeks. A pilot group of fourteen traders tried it on Wednesday afternoon. None finished without spilling coffee onto a terminal, which I regard as the first casualty of the cycle.
"The runoff brace is still in beta," Hale admitted. "We are exploring a helmet."
A helmet. On a trading floor. Read that twice and tell me you are not short something.
I am filing this from the Lula position and will switch at noon. History doesn't repeat, but it sure is about to rhyme.
