Drivers of Stock Market Confidence: What Economic Readings Markets Make

Since the beginning of the presidential administration, investors have closely followed the evolution of the twin surpluses, trade and fiscal balances. Javier MileyPolitical tension due to decline in social indicators and sudden adjustment of variables play against it.

With an inflation rate of more than 270% compared to the previous year and a commitment to deregulation in the second half of the year, analysts and operators are reviewing their perspectives on the economic situation and looking for foundations to understand the rapid rise of stocks. Bond prices in this first quarter.

To map it, The S&P Merval of the Buenos Aires Stock Exchange, accumulates a 31% increase in the peso in 2024. And though this rate is less than the inflation of the period, Measure in dollars “According to the equilibrium of the solution with money, a 17% increaseThat's double that of representative Wall Street indexes like the tech Nasdaq and the S&P 500 average.

Some Argentine ADRs rose as much as 70% in dollars on Wall Street by 2024, similar to bank bonds. Argentine stocks are trading in a price range in New York, the highest since June 2018, nearly six years ago.

On the sovereign bond side, price rises have also stood out, far higher than bonds in the emerging universe.

Los Global bonds and Bonares reach USD 50 rangeThe highest since listing on the secondary market in September 2020 and 2030 – they are earning more than 35% so far this year.

In the same sense, the Danger country JP Morgan has emphasized the decline in recent weeks and is now settling on the area 1,400 points Basics. This is the lowest since January 2021 and half of the 2,900 points in effect in July 2022.

1) Financial consolidation

In February, the surplus in general funds was confirmed for the second month in a row, with a positive balance in the trade balance for the third month in a row, both in primary and fiscal results. Stock market agents adopted this official belief in their search for a balanced budget.

“Imbalances are narrowing. In February, both fiscal results and trade balance were positive again for the second month in a row. Markets? Party,” the economist summed up. Esteban DomecqDirector of Invec Economic Consulting.

Consultant Econviews said: “We don't get married to the good financial data of January and February, because part of this is delaying payments and reducing the blender part by pure math: the lower the inflation, the less likely the blender will fall. . Achieving a primary surplus of two points of GDP. We believe that it is difficult, but we believe that the primary balance is possible, and we believe that the market will buy Argentina if that decision is reached.

“Market confidence rests on the recent positive economic indicators (…) these developments are due to a number of temporary factors, such as the reduction of public spending – especially pensions – and the increase in importers' credit,” he said. The clearing and settlement agent is Cohen Aliados Financiers. “Concerns about the level of activity falling in the first quarter, barring the contagion after the 2001 crisis, do not seem to undermine confidence,” he said.

2) Reducing inflation

December's devaluation shock pushed monthly inflation to 25.6%, although this indicator has been decelerating significantly month-on-month and there are high expectations that it will be below 10% in March.

Analysts at Consultatio Financial Services said, “In terms of inflation, the official strategy began to bear fruit very early. Already in February, inflation surprised the market with a more significant decline than expected. Preliminary data for March add to these promising signs, with a battery of high-frequency bearish indicators pointing to a continuation of last month's process.” .

“Continuity of 'delivery' was celebrated in terms of fiscal adjustment and reserve accumulation. In this context, the government showed signs of pragmatism and postponed some regulated price hikes to improve inflation indicators in the short term,” Delphos Investment Brokerage said.

3) Reduction of negative balances

The central bank has faced a more aggressive process of rebalancing reserves: it hoarded half of the dollar it entered by December 10, net purchases of more than $11,000 million since then — it was the only seller in three rounds of activity — and has strengthened. International assets over $7 billion.

“The central bank continues to accumulate reserves. After demonetisation, the Monetary Authority has bought over $11 billion. The coming days should see a higher supply of exports, while further liberalization of imports may indicate higher demand for foreign currency, although we do not believe this is significant given the volume of activity,” Neix brokerage said.

4) Trust in Govt

“The central anchor of the market, for now, is the positive image of the president,” said the report of the consultancy 1816. “Despite the adjustment in income, people support Miley, who says and demonstrates his priorities to reduce the fiscal deficit and comply with the agreements, which consolidates the rally of Argentine assets.”

And, “As the government faces a spectacular overhaul of the public accounts — which lays the groundwork for future growth — it's remarkable that the president has practically not lost popularity in his first 100 days.”

“debt The hard dollar Extends the bullish rally. “Despite political noise over the rejection of the DNU in the Senate and rumors of clashes between the vice-president and the president, ties continued to increase, driven by good news on several fronts at the local level and a constructive international environment for growing accessions,” the IEP panel observed. (Invest in stock market).

“There has been a certain optimism in investor confidence and a certain resignation of the public in the face of rejection created by the previous administration that there is more financial order,” he said. Roberto DrimerHead of WhatNet Financial Research

“Despite the consensus that a strong change is necessary, Millay has led the 'political debate' towards a rational dialogue centered on the imperative of fiscal responsibility, a question arises: Will social tolerance be maintained until the light finally comes? Of the tunnel? So far, the answer is positive,” he said. Javier KasabalFixed Income Strategist at Adcap Grupo Financiero.

5) Extrinsic motivation

Finally, a higher global appetite for risk encouraged the taking of speculative positions given signals of interest rate cuts by major central banks in the coming months.

Schroders experts commented, “There are high expectations that the European Central Bank (ECB) and other central banks will begin to cut rates in the coming months as inflationary pressures ease. A cut in interest rates typically leads to an increase in bond prices, and increased demand for bonds with higher fixed coupons leads to an increase in prices.” “Lower interest rates support business conditions, lower borrowing costs, making it easier for companies to pay coupons to bondholders.”