In the last weeks market expectations changed Regarding the future of the monetary policy of the United States Federal Reserveassigning high probabilities to the interest rate cut beginning in March 2024. The global markets celebrated after the knowledge of the October inflation in the United States, which was lower than that of September. This data, added to the dynamics of economic activity, seem to confirm the “soft landing” that investors expect for the world’s first economy in 2024 and support a looser monetary policy from the Fed next year. In this framework, a positive outlook for emerging marketswhich operated in green in recent days in line with the main Wall Street indices. A global context that could accompany the beginning of Javier Milei’s government.
Over the last month, a series of relevant data changed market expectations. Firstly, the sharp slowdown in inflation at 3.2% year-on-year. In addition, The US GDP estimate for the third quarter was revised upwards, increasing from 4.9% to 5.2%.
In this framework, depending on the tool CME Group Fed Watchthe market assigns 97.1% probability that the Fed will keep the rate at 525-550 basis points (pbs) in the December meeting and also in the January one, the first of 2024. However, it modified expectations going forward, assigning a 43.2% probability that it will reduce it to the range of 500-525 bps in March. In previous months, I did not assign a probability to a rate cut until July 2024.
Thus, emerging market bonds They rose 1.47% in the last five days and 5.2% since the beginning of December. Emerging market stocks rose 1.02% since the last month of the year began. On the other hand, the S&P 500, Nasdaq and Dow Jones They also performed well since the month began.
Refering to Argentina, The dynamics of the assets were conditioned by the process of change of Government. Bonds in dollars they averaged increases of 30% in the last month, while stocks climbed 6% on average.
Julio Roque Calcagninoresearch at TSA Bursátil, highlighted: “On the external front, the presidency of Javier Milei will face a more benevolent scenario than the one his predecessor has had to face. Among the most important points, the futures market anticipates that the Fed’s reference interest rates are already at maximums and that the cuts will begin in March of next year. On the other hand, according to the last IMF World Economic Outlookalthough the next Government will not have the prices of agricultural commodities of 2021 to 2023, yes these are expected to be substantially greater than those observed from 2015 to 2019”.
Juan Alraportfolio manager at Southern Trust, He highlighted: “The international community expects a possible reduction in rates from the Fed. This scenario would be positive for Argentina since it adds a recovery in commodities and would give Argentina a better space to recover economically. Let’s not forget that reserves are red hot and international debt puts pressure even more”.
Regarding the dollar at a global level, Thomas Villahead Internation Strategist at ConoSur Investmentspointed out that “if inflation in developed countries continues its downward path, it will allow the main central banks relax their monetary policyat least a little, and the single signal in that sense will be favorable for the markets.”
In this line, Ariel SqueoPresident of ICB Argentinaconsidered: “Until now the global dollar had a general depreciation, but it had a rebound in recent days that generated a ‘pullback’ figure which, if it ends up materializing, could give rise to a new upward trend. If the dollar loses strength and falls below 104 pointsthe international scene It will be good for Milei“, since a weak dollar can enable the stock rally again like the one we saw in November and also for international bonds, which would generate a decline in yield rates and that would be favorable for emerging markets and even more so for Argentina.”