Markets: how Wall Street analyzes Javier Milei’s triumph

The victory of Javier Milei in the presidential elections the perspective of the markets. Banks of Wall Street and investors are slowly beginning to give their first definitions about what may happen with the dollar, the GDP and the economic policies that will be carried out starting December 10.

Morgan Stanleyone of the most important financial multinationals in the US predicted an adjustment of at least 80% of the exchange rate official in Argentina in December. The bank also assured that it is likely that the country will negotiate a new Extended Facilities Program with the International Monetary Fund (IMF). “relatively fast“to avoid incurring arrears with the organization, with which it has a loan program of US$44,000 million.

Fall in GDP, high inflation and changes in the dollar: what US banks predict

For its part, since JPMorgan in a note to his clients on Sunday night provided by financial analyst Esteban Monte to Ambit, confirmed that it would not change its recommendation on Argentine bonds from its measured “market weight” stance.

“While we expect the outcome to be constructive for valuations in the immediate term, the persistent uncertainty around Milei’s political trajectory, his execution capabilities and Argentina’s fragile economic posture will continue to weigh on prices“Pereira said.

But at the same time it foresees a sharp fall in GDP with the new measures more consistent with the “shock” policy. “Milei’s policy model appears to be well aligned with shock therapy, both fiscal and monetary. Therefore, the stabilization program would prove to be a drag on growth, with our GDP forecast for 2024 at -3% year-on-year. However, However, the main question mark would be governability and social stability for the reforms.”

As for the dollar, JPMorgan He anticipated that he expects in the short term a “anticipated exchange rate alignment” with a level consisting of the parallel exchange rate “to analyze relative prices constantly” to move towards a gradual elimination of control over the exchange market.

But in the medium and long term, he hopes that once the reserves begin to be replenished, the discussion will begin on whether to opt for a floating exchange rate or migrate directly towards the dollarization. “This would be consistent with the idea of ​​​​building a bridge between bimonetarism and dollarization. In the latter case, the medium and long-term challenges associated with the fixation,” they added.

Lastly, regarding the inflation, The bank’s forecast points to a correction in price that could lead to inflation of 17% monthly in the first half of 2024. “The successful implementation of the program would be consistent with inflation. slowing down in the second half of the year. In this context, we hope that the annual inflation at 210% for the next year (350% on average), with different trajectories of the year-on-year CPI in between the first and second half. By 2025, we expect the disinflation process to persist, with annual inflation of 40% by the end of the year,” the bank highlighted.

Javier TimermanPartner or Managing Partner of Adcap Financial Group with extensive experience on Wall Street, stated in consultation with this medium that the market is “celebrating a change in economic model”. From now on a lot will depend on the makeup of the cabinet and the armed capacity, of how the political map looks. Who is going to be part of the government coalition and a lot has to do with the names, if names from Together for Change appear it will give more governability”.

Goldman Sachs, In a first note after the results he stated that “it is indisputable that a rapid change in the failed economic policies of the past is imperative. The imbalances accumulated in the economy have grown too much and “must be addressed promptly.”

Finally, Jaime Reuschand, Vice President – Senior Credit Officer Moody’s Investors Service He maintained that Javier Milei’s government faces “extreme challenges with highly uncertain outcomes.”

“While Milei proposed strong measures during his campaign, which could eventually address the strong imbalances that currently paralyze Argentina’s economic activity, distort relative prices and reduce purchasing power, These measures, if enacted as described, would cause an abrupt and profound economic adjustmentcollapsing domestic demand and threatening the financial stability. A divided Congress and social pressures will also influence the incoming president’s ability to implement corrective policies,” he concluded.