Milei’s agenda gains strength.
On May 18, the people of the City of Buenos Aires went to the polls to elect state legislators. The roster led by Manuel Adorni, currently spokesman for the Javier Milei administration, won with 30% of the vote, defeating both the left-wing Peronist candidates and also those of Propuesta Republicana (PRO), the party of the Buenos Aires mayor. Before the election, most pollsters believed Adorni would lose. Yet the day after the election, in a climate of global market downturn, Argentine stocks and bonds soared.
But why? Could a local election have such a national effect? It seems like investors welcome Adorni’s win and interpret it as a signal that Milei’s candidates could perform well in the national midterms to be held in October. Given that his party, La Libertad Avanza, holds fewer than 15% of seats in Congress, markets are anticipating that Milei will gain greater representation. He does not need a majority to be stronger: having a third of the Senate would shield him from impeachment.
The effect of the Buenos Aires election on markets is modest compared to Milei’s win back in 2023. This makes sense. While the 2023 election signaled a U-turn in terms of economic policy towards liberalization, the 2025 election can strengthen the current libertarian administration.
But the reverse was also true in Argentina, and not so long ago. Back in 2019, the primary elections made it clear that former President Mauricio Macri, a market-friendly leader who failed at implementing reforms, would lose to Peronist candidate Alberto Fernández, a left-wing populist who would undo Macri’s economic progress. The day after the primaries, Argentina’s stock market fell by 48%, an extraordinary collapse, second only to the one seen in Sri Lanka during its civil war. The fear was certainly warranted: in the following four years, Argentina fell into a recession and spiraled into hyperinflation.
In Human Action, Ludwig von Mises said that, in a capitalist economy, people “vote” at the supermarket and choose some products over others. Investors behave similarly when they choose to believe in governments and thus buy their bonds, or when they buy stocks that are promising only if the business environment of their countries is favorable. In Argentina, optimism for Milei has resulted in a financial bull market that has also strengthened the peso, brought back mortgages, mobilized the real estate market, and caused car sales to reach historic highs, all tangible effects that the general population enjoys. This dynamic means voters reinforce investors, and investors reinforce voters.
The effect of elections on markets could perhaps be even larger if more Argentines owned stocks. Only 5% of Argentines are invested in the stock market, compared to 55% of Americans, 33% of Britons, or 13% of Spaniards. This figure is consistent with the fact that Argentines owned approximately USD 277 billion held completely out of the country’s financial system, a result of decades-long interventionism and high taxes. The Milei administration is trying to lure local investors with market-friendly policies, but it has yet to win them over fully. What would happen if more Argentines were actually invested?
Regardless of the source, it seems that as long as Javier Milei remains in office, continues to pursue his libertarian agenda, and is indeed able to liberalize Argentina’s economy, he will retain investor confidence. Starting in 2023, Argentina has entered a virtuous circle: voters elect freedom-oriented policies, investors respond positively, this causes good results and more optimism, and the Milei administration profits once again in the polls as it continues to enact typically unpopular policies such as fiscal adjustment.
Of course, international troubles could still shake this progress. Trump’s trade war could bring the world into a recession with devastating global consequences derailing Argentina. But ceteris paribus, market-friendly voters can reinforce the confidence of markets, and the optimism of markets can reinforce the confidence of voters. It is not just Javier Milei’s administration, but also the people who continue to support him, who are showing the way in Argentina. In the markets and at the polls.
