Massa Overperformance Sets Up Markets' "Worst-Case Scenario" Runoff

The Argentine presidential election failed to deliver a first-round winner yesterday. Economy Minister Sergei Massa, of the governing Peronist Unity for the Homeland, registered a significant overperformance to lead populist libertarian Javier Milei ahead of the a November 19 runoff.

• In defiance of polling and betting markets, Massa won around 37% of the vote with Milei in second with 30%. Patricia Bullrich of the centre-right opposition bloc, Juntos por el Cambio, received 23.9%.
• The results set up an unpredictable second round with the candidates offering polarised solutions to Argentina's economic malaise.
• Bloomberg suggests that Massa's aggressive campaign of tax cuts and spending promises in the week leading up to the election may have influenced the result, "even at the cost of accelerating an economic crisis for the IMF’s biggest borrower."
• Economist Adriana Dupita notes: “Massa first, Milei second is possibly the worst-case scenario for markets. It prolongs already-high uncertainty for another four weeks, with neither likely to provide granular detail on their policy plans. Massa could now double down on his populist approach of an artificially strong peso, interventionism and fiscally costly measures.”
• ElectionBettingOdds, an aggregator of betting and prediction markets, now sees Massa as the slight favourite with a 53.7% implied probability of winning compared to 45.8% for Milei. A huge reversal of the pre-election odds which saw Milei close to 80% implied probability of winning.

Figure 1: Presidential Election First Round Results (45% or 40% with 10% Margin Required for Outright Win in First Round)

Source: Bloomberg