S&P Merval Bullish: Should You Keep Betting on Stocks or Is It Time to Go to the Dollar?

And it is that, as indicated to Ambit Salvador Vitelli, an expert in finance, agribusiness and markets, we are in the framework of a scenario in which we are getting deeper and deeper into the electoral race and a large part of investors do not forget “what happened after the 2019 primary elections , when many investors were positioned in stocks and then the market crashed by 50%”.

So, the point made by the market lies in the fact that, according to Andrés Reschini, of F2 Soluciones Financieras, “the yields that the shares have been showing are really very high” and the big question that the average investor asks is if they can go higher or not. “The answer is yes,” the analyst responds to this statement. But he warns, on the other hand, that since, in turn, they are high-risk assets, they can also fall a lot.

Actions: Will the rise continue?

In the same sense, the analyst and stock market expert Marcelo Bastante anticipates that Stocks are likely to continue bullish rally since just now they are recovering the pre-PASO 2019 values and explains that, although some shares have risen a lot while there are some that are further behind, this is due to something that usually happens. And it is that, “when this type of movement occurs, generally, first the papers that have the best fundamentals rise and, then, there is a second round where those that were furthest behind are added.”

However, on the other hand, it is also true that, as the economist Christian Buteler points out, stocks have risen a lot. The subject is already vox populi and, according to his opinion, when that happens, it is usually a sign of sale. Also, on the other hand, he mentions that, the parallel dollars, but mainly the blue, “approaching the STEP, may have some jump due to greater demandwhich is generally generated at electoral moments”.

What happens is that he recognizes that it is difficult to get out of the shares when one sees that they have been rising so much and with a dollar so calm so far. But, he considers that, thinking cold, it would not be a wrong strategy to start disarming actions in pesos and place positions in dollars.

In a similar sense, Elena Alonso, economist at Grupo Broda, believes that “although the shares have been rising strongly, It is a good option to be dollarized before the STEP”. Thus, he believes that taking profits and going to the dollar is a good alternative at this time for those who were able to capture the returns from the rise of the Merval. On the other hand, he does not rule out the possibility of having a hedge of the future dollar, taking into account that this allows the investor not to lose his shoes in dollars in the event of a devaluation, whether deep or gradual.

But, for Santiago Ruiz Guiñazú, Head of Equity Sales & Trading at Adcap Grupo Financiero, “Should Argentina enter a change, the recent rise in Argentine stocks, mainly in the energy and banking sectors, could only be a start”. In any case, he warns that, being a very small market, Argentina can have a lot of volatility.

Thus, Vitelli suggests that both instruments seem good options: “the dollar, for those who believe that there may be an adverse context in the PASO, and shares, for those who consider that the economic outlook may improve after the election,” with the expectation of a possible alternation in power

The dollar is lagging

Rather points out, however, that it is perceived that the dollar is a little behind. “Without going any further, just a year ago, the MEP was around $270 per currency, while inflation in the last 12 months was 114%, and if we take that value and adjust it for inflation, that would give us a reference value of $577, while today the stock dollar is close to $485,” he points out. That suggests, according to his vision, that “it is probable that, sooner rather than later, some correction of the exchange rates will arrive.”

The truth is that, for the moment, everything would indicate that this month The Government will try to do everything so that the exchange rate gap does not skyrocket. So what decision should an investor make? A good option could be portfolio diversification. “A mix of shares and dollarization could be a capital safeguard,” Vitelli proposes.

Diversification, a good option

And, in a similar line, Ruiz Guiñazú maintains that, “at this time, it is appropriate to minimize risks and be partially covered with a diversified portfolio and not 100% in stocks”. A possible composition could be to have one part in cash (dollars) and another in bonds.

However, for Reschini the decision that is made will ultimately depend on the perspectives one has about the future of Argentina and the risk aversion of each investor. “The important thing is always to consult a financial advisor and make the decision that best suits the profile of each one,” he says.

All in all, the vision of the different analysts would indicate that it is not a bad decision to take profits at this time, but neither is it to continue betting on a higher performance of the shares.

All It will depend on the risk tolerance that the investor is prepared to bear.. For those who are not prepared to continue bearing risk, taking profits and dollarizing can be a good option, as well as opting for other dollarized or inflation-indexed instruments. “But it is always advisable to make the decision correctly advised,” warns Reschini.