By Vinícius Andrade, Giovanna Bellotti Azevedo, Barbara Nascimento and Leda Alvim Wall Street strategists who recommended loading up on Brazil assets after Flávio Bolsonaro emerged as the frontrunner for president are about to see if they led clients astray or to profits ahead of Sunday’s too-close-to-call runoff.

Bolsonaro’s first-round lead over incumbent Luiz Inácio Lula da Silva spurred firms from UBS Global Wealth Management to Morgan Stanley to upgrade Brazilian stocks, forecasting gains as lofty as 25%. JPMorgan Chase & Co. turned positive on the nation’s currency and Citigroup Inc. encouraged investors to buy in across asset classes. At Gavekal Research, Louis-Vincent Gave said a “Bolsonaro swing” could unleash a wave of inflows.

Such a shift is potentially underway. The right-winger’s strong showing propelled assets higher and attracted foreign money on hopes that a new government would bring the fiscal overhaul needed to lower borrowing costs.

But that exuberant positioning now leaves investors vulnerable to a reversal. The race is virtually tied heading into the vote after Lula promised to spend even more, while Bolsonaro has offered few details on how he would deliver the reform investors are counting on. A disappointing result risks erasing the recent rally.

Even so, the prospect of further gains is enticing to investors who have watched Brazilian stocks climb 13% in dollar terms this month, and the real surge 2.5% against the greenback — one of the best performances in emerging markets.

“We don’t think the Brazil rerating has necessarily run its course,” said Alejo Czerwonko, chief investment officer for emerging markets at UBS Global Wealth Management in New York. “There is a case to stay invested.”Others agree. Fund managers overseeing a combined $90 billion have grown more optimistic about Brazilian equities ahead of the Sunday vote, according to a Bank of America Corp. survey, and foreign investors have poured about 20 billion reais ($4 billion) into local stocks this month through Tuesday.

At PGIM Credit, Cathy Hepworth said she was likely to increase her Brazil exposure heading into the runoff, with the rightward tilt of Congress reinforcing her view.

“A Bolsonaro victory really increases the prospect of meaningful fiscal adjustment,” Hepworth, who heads the firm’s emerging-market debt team, said in a Wednesday interview. “The market, as much as it’s moved, it still hasn’t really priced that in.”Some remain more cautious. Legacy Capital, a local asset manager, has pared back its risk exposure ahead of the runoff, even though it expects Bolsonaro to prevail. With the cost of downside protection rising, some money managers have opted to trim their positions rather than pay up for hedging.

The race has tightened as Lula rolled out voter-friendly measures, including a debt-forgiveness plan for so-called micro-entrepreneurs and a proposal to provide free public transportation on weekends. A poll from Datafolha published Thursday has Lula and Bolsonaro tied at 50%.

And if Bolsonaro is elected, he’ll be under pressure to deliver the fiscal adjustment investors have been demanding. Debt is piling up across the country, with double-digit interest rates driving record delinquencies from households and companies.

“We’ve been quite vocal about the need for caution right now in credit, and that remains our view for the next six months”, said Victor Tofolo, head of credit at Bradesco Asset Management, which oversees about 555 billion reais in credit assets. “We’re coming out of a tough cycle.”While Bolsonaro’s advisers have pledged to cut spending, details on how he would reupholster the public purse are scarce.

Plus, some aspects of his agenda signal a reluctance to deliver the short-term pain that true austerity would entail. Like Lula, he has pledged to stabilize debt without sacrificing social spending, while proposing tax breaks and rebates on household bills. He also backed a shorter workweek.

Across Latin America, right-wing leaders from Colombia to Argentina have struggled to maintain public support while implementing their agendas, and bull runs driven by early optimism have started to fizzle out. The trend is a cautionary tale for Brazil investors.

Alejandro Cuadrado, head of global FX and Latin America strategy at Banco Bilbao Vizcaya Argentaria SA, says a Bolsonaro victory is his base case and that outcome could strengthen the real by almost 3% to roughly 4.90 per dollar. Beyond that, market watchers will look for key milestones: the appointment of an economic team, a detailed fiscal plan and, eventually, its execution, he says.

A Lula victory, by contrast, would take markets back to “the status quo” but against a tougher global backdrop and with greater doubts about fiscal discipline, said Luciano Telo, chief investment officer for Brazil at UBS Global Wealth Management.

That could drag the real down to 5.40 per dollar “fairly automatically,” Cuadrado said. Investors would then assess whether the central bank would need to intervene or if markets can stabilize around the view that another Lula administration represents a known risk.

“If there’s no greater clarity on the fiscal front, the rally won’t hold,” said Pablo Salgado, a portfolio manager at Itau Asset Management. “The market can improve somewhat without knowing the details, but eventually we’ll need to see them.”