Violent market time: how to cross volatility?

What are the reasons? Of course, we can not attribute everything to a single factor. However, the economic mistakes of the party in power have a great responsibility in the present. In this sense, as a reference, country risk has been encouraged to reach Cambiemos government maximums, reaching base levels of 1000 basis points not observed since August 2014-. In the same vein, the Argentinean CDS market – the guarantee of the default of the Argentine debt – has also evolved.

This feeling is also reflected at the political level. The government itself has decided to confront Cristina de Kirchner. In other words, download CFK on the "ring". The lack of definition of opposition, particularly about his candidacy, contributes to heighten uncertainty. This situation causes panic among investors, while the image of Mauricio Macri is gradually deteriorating.

However, we must not forget that this context is just beginning. Make a short calendar, we emphasize three key dates. First, the closing of the June lists. Here we will know who the candidates are. In the meantime, PASO will be held in August and finally the general election in October. To travel this winding road will not be free. It is logical that there are moments of anxiety, anxiety, exchange rate fluctuation and a lot of volatility.

In this difficult context, what is the best way to cross all this volatility? From there, the answer depends on each investor. It is important to badyze the political scenario and badess the election possibilities for October according to their own beliefs.

This investor who believes that populism will come back to power thanks to Cristina should not remain in the Argentine badets. In this case, it is recommended to keep the position outside of Argentina. If this case is reached, prices will suffer abruptly. At this point, the exit of Argentine equities and bonds would lead to a sharp rise in the exchange rate.

However, for investors who believe that social humor will change and that the government will be able to reverse the present, or failing that a third politically favorable option will appear with the market, it makes sense to continue in the Argentine badets.

Our suggestion, in this case, is to arbitrate among the best Argentinian loans. We highlight the links of the city of Buenos Aires to 2021 and 2027 (depending on the choice of the duration of each client). In turn, provincial bonds guaranteed by hydrocarbon royalties such as Neuquén or Chubut, or financially-controlled provinces such as Córdoba, are also attractive. As for money, it would avoid being in pesos. In this regard, investments in local currency should be limited to meet short-term needs.

Finally, for investors who receive income from dollar instruments, a good alternative is to use FCI to invest in front-line badets in Latin America and around the world. Taking advantage of diversification is the best tool to deal with these months of local uncertainty.

(*) Portfolio Manager Personal Investments