While markets had anticipated a victory for the Democratic Party in the U.S. midterm elections – or, more accurately, a significant defeat for President Donald Trump – the magnitude of the setback surprised both proponents and adversaries alike. In the recent electoral contest, Democrats achieved a total of 228 seats in the House of Representatives, while Republicans garnered 139 seats, resulting in a net gain of 25 seats for the Democrats. This outcome pertains to the 435 House seats and the 35 Senate seats that were up for election on Tuesday. In the Senate, Democrats secured 54 seats, while Republicans obtained 44, resulting in a net gain of seven seats for the Democratic Party at the expense of the G.O.P. Consequently, while certain final results remain outstanding, the opposition has effectively gained control of both chambers. Wall Street promptly reacted to the unexpected result, exhibiting significant increases across the three principal U.S. stock market indexes: the S&P 500 (+1.7%), Nasdaq (+1.8%), and Dow Jones (+3%). U.S. Treasury bonds experienced an increase in value, as yields – which move inversely to bond prices – declined by as much as 1.2% during the trading session. In Argentina, there exists a divergence among analysts regarding the potential implications of the result for the local market.
Javier Milei’s government aligns with Trump; however, the trade policies of the U.S. president have instigated international uncertainty that has had repercussions for Argentina. In its examination of the results, the research team at broking firm Puente pinpointed two primary factors contributing to the market rally. The first was “the prospect of slower growth in U.S. government spending,” while the second was the expectation that, faced with an opposition-controlled Congress, the Trump administration would “maintain a hard line on trade and geopolitical issues to counter inflationary pressures.” Aldo Abram, executive director of the right-leaning Libertad y Progreso Foundation think tank, said: “I’m not surprised that markets reacted positively to Trump’s poor election performance. His impact on U.S. and global economic growth has been very negative.” He stressed that greater global uncertainty means fewer capital flows, less financing for demand, and slower growth. This particularly affects countries that investors perceive as riskier, “because when global risk increases, investors pull their money out of riskier markets.” Abram stated that between Argentina’s October 2025 midterm elections and the onset of the conflict in the Middle East, “investment was flowing into Argentina and the economy was growing.”
He contended that escalating oil prices heightened global risk. They also elevated inflation indicators and prompted the Federal Reserve to increase interest rates, resulting in yet another external shock for Argentina. “Frankly, the Trump administration’s policies have been negative for Argentina because they have sustained international uncertainty and made it harder for the country to secure financing,” he said. Nevertheless, he acknowledged the importance of the 20 billion financial rescue package provided by U.S. Treasury Secretary Scott Bessent last year, which “stopped the pre-election run on the peso.” That is exactly the concern generating the highest level of uncertainty among local investors: the possibility of another U.S. bailout being accessible next year, prior to the presidential election in which Milei will pursue reelection. It is important to note that Argentina witnessed unprecedented dollarization of investment portfolios in 2025, with the Central Bank of Argentina estimating the amount to be approximately $35 billion.
Jorge Ángel Harker contended that while the Republican defeat brings about a degree of uncertainty, he maintains that the associated concerns are “overblown.” And “The Trump administration used the Exchange Stabilization Fund, whose use did not require congressional approval. Therefore, the question is less about an immediate legislative constraint and more about the political willingness to repeat that support,” he explained. Meanwhile, Argentine assets faced renewed pressure. The Merval, Argentina’s benchmark stock market index, experienced a decline of 4.2% in dollar terms, as the country’s country risk index persisted in its upward trajectory, attaining 852 basis points – marking its peak level in the past 12 months. “The election result in Washington is a secondary driver compared with domestic factors, with the market focused primarily on economic activity, the legislative agenda, and electoral risk ahead of the 2027 presidential election,” Puente’s report concluded.
