Latin America

Go long LATAM ex. Brazil banks / short global bank stocks. Brazilian bank equities will underperform due to poor and worsening macro fundamentals. 

There will be little market and macro implications from the US intervention in Venezuela. Fade away any near-term moves in global oil markets. However, Colombian and Peruvian assets will benefit from lower political risk premiums. We are upgrading Colombian equities and fixed income to overweight versus EM. 

Following this weekend's election, we reiterate an overweight stance across Chilean risk assets relative to EM benchmarks and advise buying local currency government bonds (currency unhedged).

Mexican equity and fixed-income markets will continue outperforming their EM counterparts, regardless of whether global risk assets sell off or not. Also, we recommend a new trade: long Mexican stocks / short the S&P 500.

President Javier Milei’s electoral win has massively outperformed expectations. Meaningful legislative support and renewed market confidence will revitalize his liberalizing economic program. Our recommendation not to sell Argentine assets following the post-Buenos Aires election carnage has been validated. 

Chilean equities are undergoing a structural re-rating. A political swing back to a pro-business administration, a benign macro backdrop, and a resilient exchange rate will drive Chilean markets’ outperformance versus EM peers. 

USD-denominated Emerging Market bonds have been outperforming US corporates for the past year. We don’t think the rally is exhausted yet.