Argentine stocks are underperforming other Latin American equities this year, as initial market enthusiasm following President Javier Milei’s election success wanes due to concerns about weak corporate earnings. After a surge following Milei’s midterm election victory in October, the benchmark Merval Index flattened and then dipped 8 per cent this year. In contrast, the MSCI Latin America Index has rallied more than 20 per cent over the same period, marking its best start to a year since 1994.
Investors initially praised Milei for his efforts in cutting fiscal spending and curbing Argentina’s rampant inflation. However, these measures have not yet translated into a sustainable increase in corporate profits. While the economy has recovered from its 2024 recession, the pace of growth has been insufficient to drive a robust earnings cycle. This poses a challenge for equities that analysts say are already trading at high multiples.
Carolina Volman, head of equity and corporate research at brokerage One618, notes that “Stocks need clear evidence of a second phase – sustained economic growth, earnings recovery and greater regulatory predictability.” She added that equities are still awaiting a growth cycle to support a more durable expansion in multiples.
Even billionaire Stanley Druckenmiller, who had previously praised Milei, has reportedly exited his Duquesne Family Office’s position in a leading Argentina exchange-traded fund after it reached a record high. Druckenmiller has reallocated capital to Brazil, signaling a shift in investor sentiment within the Latin American market.
