How to bet on elections (emerging markets)

Does anyone have any insight on how to bet on political events (specifically in emerging markets)?

For example, some bank stocks in Argentina jumped 20% after Milei was elected, which implies his election wasn’t priced in - how would an investor who believed Milei would be elected determine the stocks that would benefit, and whether it’s priced in or not?

I know sometimes it’s obvious, like for example if there’s a specific bill passed giving funding to an industry, an investor can estimate how much value it’ll create for the company and thus whether it’s priced in. But what about scenarios like Argentina? Obviously Milei will want to deregulate the banks, but how do you know if that’s priced in since “deregulate” is so vague?

Thanks in advance to everyone who responds.


The short answer is it’s still remarkably difficult to do. The idea of something being priced in involves multiple layers of reasoning, with the ultimate conclusion being it’s near impossible to conclude, at baseline, if something is priced in or not.

Therefore one can’t operate under any assumption either way, so it doesn’t necessarily matter if you gain an edge in predicting a single happening (in your example, Milei’s election).


I may have misunderstood your comment, but wouldn’t this logic apply to any investment idea (it’s always difficult to determine if something is priced in so there’s no point in active investing)?

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For background- estimate that have put trades on or had exposure to something like 50-100 elections in my career. That said not an equity person but maybe the fixed income perspective will help:

1.) build scenarios- this can be super granular like a decision tree with dozens of nodes on different permutations of potential outcomes

2.) compile these nodes into similar groups that are likely to have similar type asset performance (I.e. candidate a and b have similar econ platforms and maybe differ on some random social stuff that shouldn’t move markets so lump them together)

3.) perform fundamental forecasting for each scenario to see how xyz outcome would impact fundamentals 

4.) use output from 3 to come up with potential asset price movements in each scenario 

5.) probability weight each scenario based on polling, experience etc

6.) overlay and positioning/technical impact 

7.) check your expectations vs. market polling and what is priced in (can use expected asset outcomes to sort of see what is priced in)

caveat that in general betting on a true binary election ie default or not is not fruitful but when the outcomes are less severe and/ or probabilities different enough from market you can generate som alpha 


FX is often the most straightforward way to express. You usually have a market-friendly right-wing candidate and a socialist/populist on the left. 

If the first wins, currency appreciates, if it's the latter, you want to short that currency. Of course then you need to factor in expectations.. you will get a bigger move if the election outcome is an actual surprise vs pre-election polls etc.

Then there's nuances. Japan 10yrs ago had a right-wing winner but that guy had lined up an ultradoveish new central banker (Kuroda), so you wanted to short the yen and go long Japanese stocks.


This is helpful, thank you. So if I thought a right wind candidate was going to have a surprise victory, could I just buy any company that will benefit from currency appreciation/short any company that will be harmed? Or is it better to just trade currency pairs instead of equities for this kind of scenario?


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