Insight  |  November 27, 2023

Muzinich Weekly Market Comment - November 27th 2023

Weekly Update: Can You Count to 4,200,000,000?

With Q3 earnings season ending, a short trading week due to the Thanksgiving holiday, and a light macro calendar, it was not surprising to see financial markets range-bound last week with the VIX index printing its low point for the year. 

The key event for developed markets was the release of the November FOMC (Federal Open Market Committee) minutes. There was a broad agreement from participants to “proceed carefully” on future interest rate moves1. This has become a code for the committee to express that they believe that the balance of risk between growth and inflation is appropriate, and that current policy rates will achieve their dual goals on inflation and employment. Any change of stance from the committee will be driven by incoming economic data.   

For emerging markets (EM), the Turkish central bank surprised investors by hiking policy rates to 40%, while consensus had been for an increase to 37.5%. With the central bank’s own forecast for inflation to drop to 36% by the end of 2024, Turkey has now normalized its monetary policy, taking real rates into positive territory.  Meanwhile in China, the authorities continue to rachet-up policy to support the property sector. New measures announced this week include a draft list of firms eligible for bank support and plans that would allow banks to offer property developers unsecured loans.

Last week’s dull financial markets left center stage for politics to capture investors’ attention. In Argentina, the Libertarian economist Javier Milei surprised the polls with a resounding victory in the runoff election, gaining 55.7% of the votes. The administration will take office on December 10th with a mandate to reset the country’s economy that for years has been accumulating imbalances. This is no easy task, considering the depleted international reserves, the largesse-driven large fiscal deficit, exhausted debt markets, and a significantly overvalued currency. However, Javier Milei has argued that there is no room for gradualism; investors are expecting a huge fiscal tightening to bring the government into surplus financing, and equally a major devaluation of the Peso—even the possibility of full dollarization has been discussed—and finally, to repair its relationship with the IMF (International Monetary Fund). The second surprise came from the Netherlands, as its general election produced a huge political upset with victory for the controversial, far-right politician Geert Wilders, driven by a campaign of anti-EU and tough immigration policies.

Politics could play a key role for investors next year. In fact, 2024 will be the heaviest election year on record, with 4.2 billion people living in 76 countries that will host ballots (see Chart of the Week)2. The European continent has the largest number of countries voting (37) including the European Parliament election in June and a general election in Britain. However, the most keenly anticipated election will be in the US—set for November 5th, with a viewed-as-likely rerun of Trump vs. Biden. All 435 representatives in the house and 34 senate seats will be voted on. Across EM, elections that could have macro implications would include Taiwan and its potential effect on US-China relations. India’s election will be held through April-May with Narendra Modi vying for a third term. In June, it appears likely that Mexico will vote for its first female President. South Africa will go to the polls sometime between May and August, with the African National Congress (ANC) currently at risk of its support falling below 50%. There are also key local elections in Turkey and Brazil. It will be interesting to see if there is a vote of support for Turkey’s AK Party after its reversal to orthodox policy to manage the economy, and if Lula in Brazil can consolidate support for his social policies.

Chart of the Week: 4,200,000,000

Source: The Economist, “2024 is the Biggest Election Year in History,” 13th November 2023.  For illustrative purposes only.


1.Minutes of the Federal Open Market Committee (31st October–1st November 2023)

2.The Economist, “2024 is the Biggest Election Year in History,” 13th November 2023 

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