The electoral climate exerted pressure on Argentina’s stock market at the beginning of November, alongside sovereign bonds and shares of Argentine companies listed on Wall Street. However, analysts suggest that the sell-off was not influenced by uncertainty regarding the U.S. midterm elections, but instead by escalating worries about Argentina’s forthcoming presidential election. The concern is that the election determining President Javier Milei’s potential second term is still nearly a year away, leaving Argentine assets exposed to an extended period of uncertainty and potentially considerable volatility. Argentine sovereign bonds traded in New York concluded the session with additional losses, resulting in the country’s risk premium solidly exceeding 800 basis points. The country risk index concluded at 829 points on Tuesday, marking its peak since late October 2025, when Milei’s administration achieved a decisive triumph in the midterm elections, alleviating market anxieties. This effectively places the administration’s aspirations for a return to international debt markets in the near term at single-digit interest rates on hold.
Meanwhile, shares of Argentine companies listed on US stock exchanges experienced a decline, even as major indexes on Wall Street recorded gains. Technology company Globant experienced the most significant decline of the day, falling by 5.4%. This was followed by construction firm IRSA, which saw a decrease of 3.3%, and electricity provider Edenor, which dropped by 3%. The Merval, Argentina’s benchmark stock index, was the sole major local market indicator to experience an increase during the session, rising by 1.7%. However, it continues to reflect a decline of 1.7% thus far this week. In its latest report to clients, local brokerage firm Portfolio Personal Inversiones noted that market attention is focused on the US midterm elections, “which will determine Trump’s room for maneuver in pursuing his agenda over the next two years.” Analysts indicated that a Democratic triumph in both chambers of Congress would constrain Trump’s capacity to advance new legislative initiatives and might also complicate fiscal negotiations.
The initial challenge will arise on December 11, coinciding with the expiration of government funding and the renewed risk of another shutdown – a potential partial or complete cessation of federal government operations should Congress neglect to approve a budget or funding bill. “In 2027, the debate over the debt ceiling will also come into play,” they explained. Nevertheless, the PPI report indicated that investors have already factored in a Democratic victory, suggesting that particular scrutiny will be directed toward the ultimate composition of the Senate and the extent to which the outcome diverges from market expectations. They cautioned that determining control of both chambers “could take several days” as vote counting and verification continue, and that an unexpected result “could add volatility to US Treasuries and, in turn, to emerging-market debt,” including Argentina’s. Adopting a domestic-centric perspective, analysts at Max Capital contended that Argentine bonds “have been overly punished” in recent days, indicating the influence of an idiosyncratic factor.
However, they pointed out that recent domestic developments have not been particularly negative either: “Polls have not deteriorated, and economic activity indicators point to a rebound in September.” They considered that “it is reasonable to say that electoral risks are gradually becoming more tangible, but the elections are still almost a year away.” Consequently, they argued that “the sell-off appears to have been excessive, both for USD-denominated bonds and equities.” Along similar lines, market economist Gustavo Ber said that “session after session, it becomes increasingly clear that electoral uncertainty is weighing too heavily on domestic assets.” As a result, political factors “have become paramount,” while external conditions have taken a back seat for now. “The lack of market drivers continues to leave valuations at the mercy of capital flows which are currently dominated by sellers. As a result, macroeconomic data, even when positive, fall on deaf ears and fail to generate any enthusiasm,” he concluded.
