The enthusiasm that investors initially had for Argentina following Javier Milei’s election victory in November 2023 has significantly dwindled, as evidenced by the stark decline of the Merval index. This index, which tracks over 20 of the country’s major companies, has plunged approximately 30% in 2025, making the Argentine stock market the poorest performer globally in the first eight and a half months of the year.
The downturn commenced at the beginning of 2025, when many investors opted to realize their profits after a successful 2024. It gained momentum in April amid the intensifying trade confrontation between the United States and its trading partners. However, the most significant catalyst for the current slump occurred in early September, following Milei’s surprising defeat in the province of Buenos Aires. Though these elections were initially regarded as relatively inconsequential, the unexpected success of the leftist Peronist party—winning by a margin of over 13 points—poses a serious threat to the viability of Milei’s party, La Libertad Avanza.
Investor sentiment has shifted dramatically, casting doubt on Milei’s reform agenda as fears grow regarding potential legislative setbacks in the upcoming elections scheduled for October 26. These elections will determine half of the parliamentary seats and a third of the Senate, raising concerns about the likelihood of a parliamentary gridlock that could stymie further reforms.
The markets have been rife with fear, as reflected in Argentina’s country risk soaring to above 1,200 points—levels unseen since late 2024. The local currency, the peso, has also depreciated sharply, breaking new records and reaching 1,474.50 pesos to the dollar. In response, the Central Bank intervened, selling $53 million from its foreign reserves in an effort to stabilize the peso. Compounding these issues, Argentina’s access to financing markets remains severely restricted, leading analysts at Barclays to question the country’s ability to meet its financial obligations without additional debt issuance.
The aftermath of the electoral results saw the Merval index drop nearly 13% in a single day, and it has yet to recover from this significant decline. Mali Chivakul, an emerging markets economist at J. Safra Sarasin, noted that the market is currently reflecting a “weaker and bumpier adjustment path.” Although there are potential growth prospects from supply-side deregulation, uncertainty surrounding the elections continues to loom large.
Milei’s support has also taken a hit, as his approval rating fell below 40% for the first time since taking office, largely due to economic stagnation and corruption allegations. In response, he has made promises of increased spending in areas such as pensions and education, attempting to stem the tide of diminishing voter support. During a recent budget presentation, he asserted that “the worst is over,” trying to regain public confidence.
In the wake of his election, Milei had initially inspired significant investor optimism, with the stock market rising more than 22%—the highest increase since 1991. The financial sector was particularly buoyed by his proposed reforms, including drastic fiscal adjustments and privatization of public firms. Throughout 2024, the Merval index surged by over 170%, far outperforming global counterparts.
However, current circumstances have led many to question this trajectory, especially following Milei’s electoral setback in Buenos Aires, a region historically dominated by Peronism. While Milei may still have a chance to regain momentum before the upcoming elections, analysts caution that any legislative defeat could severely undermine his reform agenda.
If Milei and his party manage to secure a victory in the legislative elections, it could restore investor confidence and potentially reverse the peso’s decline. Such an outcome would also provide relief to listed companies, many of which have seen their stocks plummet—almost 50% when measured in dollars for the year 2025. Analysts believe that a weaker dollar could invigorate economic activity, with hopes that this is achievable in the near future.
With six weeks remaining until the elections, the Argentinian stock market faces significant volatility, striving to avoid further declines in global rankings. The outcome of the elections will be crucial for future market stability and investor sentiment in the region.
