Milei, under the gaze of Wall Street: how the result of the PASO is analyzed in the US

The surprise of local analysts with the result he achieved Javier Milei in the STEP also seems to be replicated in the main banks of Wall St. The markets were betting on a good performance by the moderate candidates who achieved a meager performance against the candidate of La Libertad Avanza.

investment bank analysts JPMorgan They recommended this Monday to maintain “market weighting” on Argentine bonds, after Javier Milei’s surprising victory in the primary elections increased uncertainty about the October presidential elections.

“We maintain Argentine market weighting in our EMBIGD model portfolio, taking into account the increase in uncertainty that will set the pace of the electoral process,” JPMorgan analysts said. At the same time they also projected “increasing pressure on the exchange rate, which would result in a widening gap between parallel and official exchange rate“, according to a note from analyst Diego Pereira.

Citi’s analysis

Meanwhile, since the report of the citi shared by trader Stephen Monte a Ámbito, points out that the result was “shocking” and adds that the risk level of risky assets increases. What are the positive aspects for markets, according to the City:

• Because it is important: far-right candidate Milei significantly exceeded expectations in PASO election results. He wants to dollarize the economy and eliminate the Central Bank so that the markets reconsider the risks ahead of the elections. However, “we see room for possible policy moderation.”

Three takeaways for markets:

1. higher risk. This result was the least expected, since the focus was on the pro-business coalition. Milei’s stance on the BCRA and the dollar will allow Argentine bonds to recover even more. Milei has said that he wants to ease all exchange restrictions and eliminate withholdings on exports, calling to “eliminate” the BCRA. “The details are not clear,” they said.

2. High uncertainty: The results are tight. With 96% of the ballots counted, Javier Milei won 30.1% against Patricia Bullrich’s coalition winning 28.3% and Sergio Massa’s ruling Peronist block scored 27.2%. The Argentine markets are prepared for 3 months of political uncertainty. The election will take place on October 22, but since neither candidate is likely to win outright, a runoff is likely to take place on November 19.

3. silver linings: Milei is a negative market result due to her policy and as an unknown quantity. Still, risk could eventually be limited, with an already bearish macro outlook and some upside risks. miley it may still be more favorable to the market than expected, since he wants to privatize state-owned companies and his most controversial policies could be toned down. “He was compared to Trump, and remember that US stock markets actually rallied after he was elected.”