Electoral trade: what data can trigger the bullish rally and what actions will benefit the most

He “electoral trade” It is the concept that refers to the bets of the market prior to the electoral cycle where shares and bonds are bought and sold to bet on a winner or a winner. But so far, there is no full consensus that this cycle is already underway.

While some economists say it started last year and continues this year, others say there are still a number of drivers that they might trigger it sooner rather than later.

Those who postulate that it has already started refer to the good stage that the shares have been experiencing since last year. It is worth remembering that in 2022, Argentine shares on Wall Street had an excellent performance with a profit of 170%. Meanwhile, BYMA’s S&P Merval closed the year with a return of 43% in dollars, making the Argentine stock market the best performing one worldwide. However, the bonds that performed best last year were those adjusted for CER, but still failed to outpace inflation. Currently, a few stocks on Wall Street are ahead of inflation, but the local market is still on a roll and dollar bonds are at purchase price for the short term, if we stand in “electoral mode.” .

Doing this little review, one might come to think that the movement that can generate the most significant changes, for better or for worse, is when we get closer to the STEP. What do analysts think of this event and what may be the most beneficial actions?

Two clear moments of electoral trade

Sebastian MenescaldiEcoGo Associate Director, spoke with Ambit and affirmed that there are two moments in which the electoral trade would be activated.

• The choice of candidates, first trade: “I think that perhaps today the issue of whether they are all together, this remains, there are no changes despite some flirtation that occurred at some point and there perhaps the issue is more about who the candidates are going to be. The issue is who will be the candidates of the ruling party, because there the question is whether Massa will be the candidate or not. If Massa is there, it is because he will no longer be a minister. So there the economy can take another direction. If Massa is there, which could be him or indirectly someone close like his wife, it will be something else and the issue will be a little more stable in the short term ”.
• Second trade since August: after the PASO, Menescaldi affirms that after the big “poll”, it will be defined what the population is voting for. “Are you voting for doves, are you voting for hawks? Or is Leon being voted? Because each of those elections is going to have a different economic vision going forward.

Although he added that up to that moment he had tried to forecast the this year’s tradeHe did add that everything will depend on the results and this is how he defined the candidates according to his worldview about the economy:

– The “doves” They represent for Menescaldi “the continuity of the stocks, more moderate, more stable and endorsed by the red circle, be it Larreta or Massa”.

– The “hawks” represented, for example, by Patricia Bullrich, would represent something more of a “shock” than a gradual one. “It would be something more disruptive,” she said.

another different position

Gustavo Neffa, Director of Research For Traders, assured with this medium that for him the electoral trade “has already begun.” “There is a fixed income market that may have its own problems and with a lot of uncertainty regarding the macro. But the actions They are more detached and have already been rallying since July of last year, specifically some sectors such as banks joined in December and this year they have once again performed very well. So the electoral trade is already underway”.

“Beyond the macro that deteriorates, the inflation that accelerates, the exchange rate that is evaluated, the actions have managed to be the preferred electoral trade and there all the sectors related to oil are the most attractive to us. You have Tenaris, Vista Oil, YPF and I would add TGS”, commented Neffa.

“Utilities have also had an extraordinary performance in recent times, in the last year but well, in the last 6 months especially, because the government has to alleviate the effects of a growing fiscal deficit, granting tariffs and lowering subsidies, it is that is, transfers to the private sector. That is why the increase in rates is pure profit for these companies that cover the costs, ”he asserted.

What are the most recommended investments to position yourself

According menescaldi, the shares “are already well advanced compared to their historical values”. In this sense, he affirms that more value will be given to dollar bonds. “I don’t think any next government is going to restructure the issue of pesos, but I think the greatest value will be on the side of bonds and dollars.”

Meanwhile, Neffa presented some of those recommended by Research For Traders in pesos and in dollars for corporate and provincial bonds:

Bonus Track: the expectation of the market in relation to the ruling party

A recent report from Adcap Financial Group for clients carried out by Javier Casabal revealed a first glimpse of the expectation in these elections, ruling out a scenario similar to that of 2019 when former President Mauricio Macri lost and the exchange rate skyrocketed. “We believe that a repeat of 2019 is not a likely scenario. for the following reasons: in 2019 due to high polarization, the two main coalitions gathered more than 90% of the votes. When the FDT obtained almost 48% of the votes in the August primaries, the result was a sure victory for Alberto Fernández in the first round.”

Therefore, in line with what Vice President Cristina Kirchner recently said, the market expects that “with the irruption of the liberal candidate Milei, we are heading towards tripartite elections that will probably be decided in a second round in November, as happened in 2015 We expect the FDT to play its best cards to retain as much power as possible, focusing on the Province of Buenos Aires. we expect the FDT to do everything possible to keep inflation and devaluation as controlled as possible. Consequently, we do not expect any default on the short-term debt in pesos or a discrete jump in the official exchange rate.”

As for the dollar, they estimate that “volatility should be expected, but we believe that the Massa administration will try to contain it to protect the FDT’s chances for the general elections in October.”