Stock updates and important progress in Argentina
US policy flip-flops continue, Argentina reduces capital controls
In this update:
The latest US tariff policy flip-flops
Important developments in Argentina
Following "Liberation Day", brief comments on the potential impact on underlying businesses of followed stocks (OfWealth and legacy ex-UKIW)
Specific developments at a handful of companies (one profit upgrade, one downgrade, one possible takeover)
Recent macro events have caused a great deal of market price volatility, including in areas which are pretty much unaffected by US tariff policy and its potential repercussions. So I thought I'd do a brief rundown of how the companies I follow might be affected, or not.
With regards to the evolving US tariff policies, see my earlier updates:
"Liberation Day" sparks global market chaos
Chaotic policies, chaotic markets
"Ping-pong balls in a washing machine"
Following the last update sent out on Friday, there has been further policy flip-flopping from the US government, which continues to make things up as they go along.
Faced with rocketing prices, smartphones, computers and some other electrical goods will be exempt from US import tariffs for the time being.
However, it was also announced that new tariffs on semiconductors will be announced later this week.
President Trump confirmed that he plans to impose import tariffs on pharmaceuticals.
Trump also said he's considering tariff exemptions for imported cars and car parts, to give US manufacturers time to adapt.
The EU has paused retaliatory tariffs on selected US goods until July, while negotiations with the US continue.
Chinese President Xi Jinping is visiting Vietnam, and has called for closer trade ties between the two countries.
The US dollar has continued to drift lower against other major currencies. At the time of writing, the trade-weighted DXY index is down 8% year-to-date.
The gold price has remained firm, currently at $3,207 per troy ounce. Some investment banks have been upgrading their price expectations for the end of the year, including Goldman Sachs at $3,700 and UBS at $3,500.
Important progress in Argentina
Meanwhile, Argentina (where I live) continues deep reforms to its economy and financial system, under "liberal libertarian" president Javier Milei. But there are still major challenges, such as a lot of debt interest and maturities coming due this year and beyond, and extensive capital controls to unwind.
On Friday evening, the administration made a surprise announcement about the currency regime. The official Argentine peso exchange rate will no longer be fixed (actually, a crawling peg to the dollar), but allowed to float within a band of 1,000-1,400 pesos per US dollar.
Also, Argentine citizens will now be allowed to buy as many US dollars as they like, using the pesos in their bank accounts. For many years this was limited to just $200 per month.
Obviously this is not yet a full liberalisation of the peso, but it's an important step in the right direction. As I write on Monday, the official exchange rate has devalued by 10% to 1,210 pesos per dollar, and the market rate determined by cross-border bond and stock transactions has strengthened by 8% to 1,235 pesos per dollar.
Previously there was a wide gap between the very fake official rate and the partially fake market rate (partially fake since the central bank constantly intervened to prop it up). Now that gap has largely disappeared.
But these are still not free market exchange rates, since the central bank is allowed to intervene within the band. So I believe it's likely that they are ensuring that the peso doesn't plummet too much straight away. But I'd expect it to trend towards the 1,400 end of the band over time. And eventually, perhaps towards the end of the year, for the peso to have a full free float. We will see.
Anyway, it's a step in the right direction. And it's likely to spur further foreign direct investment (FDI) into Argentina, as capital controls are wound down.
Separately, the IMF has agreed to provide $20 billion of new funding to tide the country over, with $12 billion meant to arrive on Tuesday.
Also, US Secretary of the Treasury Scott Bessent arrived in Argentina on Monday, in a clear sign of support for Milei from the Trump administration. It's not like Bessent has nothing else to do at the moment. Reports suggest that the US government may make a direct loan to Argentina, in addition to the IMF agreement.
The combination of the new funding and the relaxation of currency and capital controls caused Argentine stocks to rocket on Monday. The dollar prices of Argentine bank stocks were up 14-17%, but other sectors rose strongly too.
I'll now turn to brief comments about the stocks that I follow here, in the light of recent events (for paid subscribers).