Kamala Harris vs. Donald Trump: How the U.S. Election Could Affect Real Estate Investment Funds and Their Shareholders in Brazil

Potential new interest rate hikes by the Fed could create an inflationary spiral in emerging countries like Brazil. This would make the dollar more expensive, leading to higher prices locally and forcing the Selic rate up.

Given the still uncertain outlook regarding U.S. voters' decisions, it is likely that the Central Bank of Brazil will postpone the next Selic rate decisions until next year.

"If the previous forecast was to end the year at 9%, that chance is now remote," says Barbosa.

Lower interest rates tend to attract more investors to real estate funds. Over the past 12 months, the performance of brick-and-mortar funds has still outpaced that of paper REITs, mainly due to the start of the Selic rate cut cycle, which particularly benefits those investing directly in real estate.

However, discussions about changes in the pace of interest rate cuts have reduced market optimism and stimulated the search for lower-risk assets, which have become more attractive.

In June of this year, the IFIX, an index of the most sought-after real estate funds on the stock exchange, maintained a year-to-date increase of 1.35%. Nevertheless, with the prospect of maintaining the Selic rate, funds like Kinea Hedge Fund (KNHF11) have reduced their appetite for allocations in brick-and-mortar funds, confirming the current distrust in this asset class.

For Barbosa, from Clube FII, if Trump is elected, U.S. government public spending is likely to be higher, initially increasing the U.S. Treasury's expenditures and pushing interest rates up. Additionally, the Republican plans to increase import tariffs and reduce internal tax burdens, further widening the American fiscal deficit over time, in a cycle that favors higher rates.

With Kamala, the forecasted scenario is a continuation of the Biden administration, leading economists and market analysts to believe in a more predictable economic environment. Moreover, as she is more aligned with the current Brazilian government's political spectrum, her election is likely to have less impact on Brazilian investors.

In a recent interview with Valor, André Colares, CEO of Smart House Investments, stated that a Kamala administration would be beneficial for emerging markets. The Democrat has a much less protectionist stance, although her predecessor did not fully reverse the barriers implemented by Trump during his administration from 2016 to 2020.

He believes Kamala has a more cooperative approach to international trade, which favors global economic stability.

In this case, a bilateral policy between Brazil and the United States is likely to be favored with Kamala in power, creating a more stable economic environment that could even help a potential appreciation of the real against the dollar, increasing the attractiveness of real estate assets.

Analyzing the historical price and yields of the KNRI11 fund since 2016, one can observe peaks under both Republican and Democratic administrations.

Another industry analyst, however, sees the situation differently. For Jonata Tribioli, an expert in real estate investments and COO of Neoin, if Trump is elected, his policies could directly benefit sectors like real estate in the U.S. and indirectly in Brazil.

"Trump's pro-market approach and tax incentives could keep interest rates low, favoring real estate investments and strengthening the real estate sector in the U.S. This could increase the appetite for riskier assets in emerging markets," opines the analyst.

Conversely, if Democrat Kamala Harris is elected, Tribioli believes that the current Vice President could adopt stricter regulatory policies and increase taxes, especially on wealthier sectors.

"This could create a less favorable environment for real estate investments due to potential cost increases and more significant regulatory restrictions," he comments.

Furthermore, Tribioli notes that a Democratic administration could also significantly invest in infrastructure and social programs, creating new opportunities for the real estate sector, particularly in social housing and sustainable urban development.

Lastly, a focus on stringent environmental policies could impact the construction and real estate development sector, influencing investment priorities and resource allocation in funds that focus on sustainable real estate.