Mariano Torres, portfolio manager at Quaestus Advisory, analyzed the factors that promoted the recovery: “At the local level, the arrival of Massa brought with it expectations of improvements on key issues for Argentina. On the one hand, the strengthening of international reserves. On the other, the expectations that it may generate certain structural changes in pursuit of lower spending, and in a certain sense are beginning to move in the direction of fiscal balance. And, finally, a key issue for Argentina was the constant loss of dollars due to the exchange rate gap and the trap that generates disincentives for exporters. In this sense, Massa, without making a devaluation, made the stocks more effective and began to accumulate dollars, although at a slow pace.
Likewise, the arrival of the minister coincided with a global context of improvements on Wall Street that strengthened emerging markets, mainly Latin American ones. In this context, a Balanz report highlighted that “the good corporate results in the United States during the second quarter were a key part of the improvement in risk appetite at a global level, which was also helped by some relief in interest rates. of interest”. “In this way, the assets with the best performance in the last month were the shares in Latin America (with increases of 10.4%), the growth shares in the United States (9%) and those with smaller capitalization (8.6%). ”, he added.
However, the global inflation outlook is still uncertain and creates uncertainty about how emerging assets will continue. Fed Chairman Jerome Powell’s speech in Jackson Hole renewed fears of further tightening of monetary policy in the belief that inflation will remain high for some time.
At this point, Torres warned that “a more hawkish tone from Powell complicates the outlook for Argentina, since lowering inflation is not free, and it comes at the cost of reducing economic activity.” And he added: “Powell will probably seek a controlled recession to remove pressure on prices on the demand side, however, this eliminates liquidity globally, and for countries like Argentina it takes away the possibility of rolling debt and increases the possibilities default. A positive scenario is that the recession is as mild as possible, that the Fed manages to lower inflation and does not have to raise rates any more, because the cost of requesting debt would become even more expensive.
Likewise, from Balanz they considered that “Jerome Powell’s speech in Jackson Hole indicated that the monetary policy rate will remain high for a while because historical experience shows that we must be cautious with premature relaxation.” Given this, they stated: “Due to the Fed’s position in its fight against inflation and the certain divergence between the Fed’s message and what asset prices incorporate, we see that the risk towards a new adjustment in financial conditions remains high and the focus will be on the Fed meeting in September, as it will provide an updated overview of its projections and very likely reinforce the tightening message”.
Source: Ambito
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