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USD/MXN forecast ahead of Fed and Banxico rate decisions

The USD/MXN exchange rate has moved sideways in the past few weeks as traders eye the upcoming Federal Reserve and Banxico interest rate decision. The pair was trading at 20.11 on Friday, down by 3.45% from its highest level this month.

Federal Reserve decision

The USD/MXN pair will react to the upcoming Fed decision. In it, officials are expected to cut interest rates for the third time this year because of the relatively soft-ish labor market.

Data released earlier this month showed that the economy added over 200k jobs, while the labor participation rate retreated slightly. The unemployment rate rose slightly to 4.2% during the month.

These numbers mean that the labor market was not growing as initially expected. As a result, the Fed believes that cutting interest rates will help to ease the cost of doing business and boost the sector.

The Fed’s challenge is that US inflation is still a big challenge. Data released last week showed that the headline Consumer Price Index (CPI) rose from 2.4% to 2.6% in November.

Similarly, the core CPI remained unchanged at 3.3% during the month, much higher than the Fed’s target of 2.0%. Analysts expect that inflation may remain stubbornly higher, especially if Donald Trump implements his policies.

Trump has threatened to deport millions of undocumented migrants, a move that will affect key sectors of the economy like agriculture, hospitality, and construction. 

He has also pledged to impose large tariffs on imports, a move he hopes will reduce the trade deficit. However, as history has shown, tariffs don’t solve trade deficits since they are just added to the final cost of goods.

Trade deficit is usually the difference between imports and exports. For the US to lower it, it would need to reduce imports, while dramatically increasing exports. The challenge is that the US does not sell many goods to other countries because of the higher cost if doing business.

Banxico interest rate decision

The next important USD/MXN exchange rate news will come out on Thursday when Mexico delivers its interest rate decision.

Like other central banks, Banxico has embarked on a rate cutting cycle, a move it hopes will support the ailing economy. 

It started cutting rates in August, when it moved them from 11% to $10.75%. It has then cut rates two more times since then.

Economists see the bank cutting rates again in the next meeting as it prepares for the Trump era. In a recent X post, Trump warned that he would sign a 25% tariff on Mexican goods because the country has “allowed” illegal migrants 

The Banxico is supported by the recent inflation flows. Recent data showed that Mexico’s Consumer Price Index (CPI) slowed from 4.76% to 4.55% in November, inside the bank’s target. 

There are also signs that the Mexican economy is not doing well. It expanded by 1.6% in the third quarter, a big slowdown from the 2.1% growth in the previous quarter.

USD/MXN technical analysis

USD/MXN chart by TradingView

The USD/MXN exchange rate has remained under pressure in the past few weeks. It has retreated from a high of 20.82 to a low of 20.11. Along the way, it has moved below the lower side of the rising wedge chart pattern, a popular bearish reversal sign.

The pair remains between the 50-day and 25-day Exponential Moving Averages (EMA). It has also formed a double-top pattern at 20.82. A double-top is one of the most popular bearish signs in the market. 

Therefore, the USD/MXN pair’s path of the least resistance will be downwards, with the next point to watch being at 19.50.

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USD/RUB: Is it a good carry trade pair as BoR and Fed diverge?

The Russian ruble has remained under pressure this year as the impact of sanctions and a stronger US dollar continued. The USD/RUB pair was trading at 104.50, down by 8.8% from the highest point this year. It has shed about 14% of its value this year. Here’s why the USD to RUB would be a good carry trade pair.

Bank of Russia interest rate decision

The USD/RUB exchange rate has been in the spotlight as the Russian war in Ukraine started. 

It was trading at 78.2 before the war started and then surged to 154 as more countries implemented large sanctions on Russia. The Russian ruble then strengthened to 50.72 in June 2022. 

It has then weakened by over 106% even as the Russian economy remained resilient. Recent data showed that Russia has an unemployment rate of 2.3%, much lower than US’s 4.2%. Its rate remains much lower than the pandemic-era high of 6.4%.

Russia’s GDP has also continued to do well, helped by the increased military spending. As a result, recent data showed that Russia had a GDP growth of about 3.1% in the last quarter.

The challenge, however, has been that Russia’s inflation has remained high in the past few months. Recent data showed that the headline Consumer Price Index (CPI) rose from 8.5% to 8.9% in the last month. The CPI has grown steadily from last year’s low of 2.3%.

Russia has also been hit by the ongoing trends in the energy market, where Brent and West Texas Intermediate (WTI) have retreated by double-digits this year. Energy is an important part of the Russian economy because it is the biggest export and cash generator. 

The next important catalyst for the USD/RUB pair will be the upcoming Bank of Russia interest rate decision. Economists expect that the bank will continue hiking interest rates in a bid to bring inflation down. 

The central bank started hiking rates in July last year, moving them from 8% to 21% today. Analysts expect the bank to continue hiking rates this week, moving them from 21% to 23%.

RUB and USD carry trade opportunity

In an ideal situation, the divergence between the Federal Reserve and Bank Rossii would make a great carry trade opportunity.

A carry trade is a situation where people borrow from a low-interest rate country and invest in higher rate country.

In this case, the Russian central bank is hiking rates, while the Federal Reserve is cutting them. Economists expect the Fed to cut rates by 0.25% in its meeting on Wednesday this week.

If this happens, it means that the Fed has now slashed rates by 1% as it continued to engineer a soft landing for the economy. 

Fed’s rate cuts and Bank of Russia’s hikes, have led to a wider spread, which would be ideal. The challenge, however, is that the Russian economy is suffering from substantial sanctions such that a carry trade would be almost impossible.

Russia has also embarked on currency controls, where it has made it highly difficult for people to move cash from the country. 

USD/RUB technical analysis

USD/RUB chart by TradingView

The weekly chart shows that the USD/RUB exchange rate has been in a steady uptrend in the past few months. It recently crossed the important resistance level at 102.30, its highest swing in October last year. 

The USD/RUB pair has formed a rising triangle pattern, a popular bullish sign. It has also remained above the 50-week and 100-week moving averages.

Therefore, the pair will likely continue rising in the near term. If this happens, the next point to watch will be at 114.48, the highest point on November 25.

The post USD/RUB: Is it a good carry trade pair as BoR and Fed diverge? appeared first on Invezz

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USD/TRY surged to a record high: will it make it a comeback?

The USD/TRY exchange rate has had another difficult year as actions of Turkey’s central bank failed to reboot the currency. The pair has jumped to a record high of 34.88, up by almost 20% this year. This performance has made the Turkish lira one of the worst-performing currencies this year.

US dollar index strength

One reason for the ongoing USD/TRY surge has been the US dollar, which has been in a strong rally in the past few months. The US dollar index has jumped to $107, up by about 7% from the lowest level in October. 

This rally has continued after Donald Trump won the US election in November. He has pledged to implement some policies that are seen as being highly inflationary.

For example, Trump has pledged to deport millions of illegal migrants, a move that will lead to labor shortages in key industries like construction and agriculture and lead to high inflation. 

He has also promised to implement large tariffs on imports. Historically, tariffs have led to higher inflation in the country since sellers increase their prices.

The next key catalyst for the USD/TRY pair will be the upcoming Federal Reserve interest rate decision scheduled on Wednesday. This will be a crucial decision because it will set the tone for what to expect in 2025.

Economists expect the Fed to cut interest rates by 0.25% because of the deteriorating labor market. Precisely, the bank is concerned that the unemployment rate has remained stubbornly high.

Turkish Central Bank ahead

The other crucial catalyst for the USD/TRY will be the next Central Bank decision, which will happen on December 26. 

This will also be an important decision because it will set the tone for what the bank will do next year.

There are signs that the CBRT will delay its rate cuts plan because inflation is not falling as expected.

Recent data shows that the headline Consumer Price Index (CPI) retreated from 48.58% in October to 47% in November. The CPI figure was higher than the median estimate of 46.60.

October and September figures were also higher than expectations. This means that the CPI will end the year above 40%, higher than what the CBRT was expecting.

Ideally, the CBT  should maintain higher interest rates for longer because Turkey’s inflation remains stubbornly high. The challenge, however, is that Turkey does not have an independent central bank and President Erdogan does not love high rates. 

On the positive side, some analysts believe that the Turkish lira is a good carry trade because of the ongoing 50% interest rates. With US rates being below 5%, some money managers have decided to borrow US dollars and invest in the Turkish lira, especially now that the latter has been stable. 

Some of the most popular companies that have bought the Turkish lira are from T. Rowe Price and Pinebridge. In a recent note, an analyst at T.Rowe Price said:

“Long Turkish lira has been a high-conviction carry trade in some of our multi-asset portfolios since June 2024 – we have recently added to the position following a sudden depreciation.”

USD/TRY technical analysis

USD/TRY chart by TradingView

The weekly chart shows that the USD/TRY exchange rate has been in a steady uptrend in the past few months. It has remained above the 50-week moving average, while the Relative Strength Index (RSI) has moved above the overbought level.

The pair has also formed a rising wedge pattern, a popular bearish reversal sign. Therefore, there are rising odds that the pair will have a strong bearish breakout in the coming months, with the next point to watch being at 32.5. 

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Bitcoin price prediction: The long-term bullish case for BTC

Bitcoin price has held steady in the past few months, and is holding near a record high as demand remains high. The coin was trading at $101,760, which is about 570% from its lowest point in 2022, making it the best-performing major asset.

Bitcoin demand and supply dynamics

All signs show that Bitcoin has strong demand and supply dynamics, which explains why the price may continue rising in the near term.

Bitcoin has a supply cap of 21 million coins and the total supply as of now is 19.79 million. This leaves about 1.21 million coins to be mined. 

At the same time, millions of coins have been lost permanently, while the amount of Bitcoins in exchanges has dropped to the lowest level in years. These coins stand at about 2.2 million, meaning that millions more are held in self-custody accounts. 

Bitcoin’s mining difficulty has continued to rise, especially because of the halving events. It is unclear whether many mining companies will produce enough coins in the next few decades. 

Therefore, Bitcoin’s supply will continue being a big challenge in the next few years. At the same time, demand is expected to continue rising in the next few years. Recent data shows that spot Bitcoin ETFs are seeing robust inflows. These funds have had over $35 billion in inflows this year, a trend that may continue in the next few years. 

Most importantly, companies will likely continue buying more coins in the future. Data shows that companies like MicroStrategy, Marathon Digital, Riot Platforms, Tesla, and Coinbase owns thousands of coins. Other large holders are firms like Block, Galaxy Digital, Semler Scientific, and NEXON have continued to buy more coins.

The next wave of purchases will likely come from mainstream companies like Apple, NVIDIA, and Amazon. These firms have seen MicroStrategy’s success and will likely want to replicate it over time.

Countries to start buying BTC

After that, countries will likely start buying these coins. Already, the US holds thousands of Bitcoins, which it has seized from criminal organizations. Donald Trump is considering converting these coins into a strategic reserve. 

If this happens, more countries will likely embrace Bitcoin as their reserve assets. Already, most countries like China, Russia, and Turkey have invested in gold, and many analysts see Bitcoin as a digital gold. If this happens, it will make Bitcoin, a rare asset, rarer.

A main catalyst for such a move will be the soaring global debt, which has been in a strong uptrend. The US now has over $36.3 trillion in public debt, a figure that is growing by $1 trillion each quarter. This means that it will cross the $40 trillion mark in the next few years.

Other countries are not doing well either. For example, China has over 71 trillion RMB in debt or 69% of the GDP, a figure that is growing. The same trend is happening in Europe, where a country like France is seeing a near 10% deficit.

Therefore, there are chances that these countries will move to Bitcoin, which is seen as a good asset.

Bitcoin price analysis

The weekly chart shows that the price of Bitcoin has been in a strong bull run in the past few months. It has constantly remained above all moving averages and formed a cup and handle pattern. 

If we measure the depth of the cup, we can assume that the coin will rise to $122,000 in this bullish cycle. If this happens, it will then suffer a brief pullback and then resume the strong bullish trend in the next few months. Over time, Bitcoin may rise to over $200,000.

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US market outlook for 2025: can the bull run last?

Few could have predicted the remarkable market performance in 2024.

Starting the year with low equity valuations, recessionary warnings, and cautious investor sentiment, the stage seemed set for challenges.

Yet, a steady stream of interest rate cuts by the Federal Reserve, along with growing confidence in AI’s transformative potential, proved to be the game-changers.

Despite sporadic market jitters—ranging from geopolitical conflicts to Big Tech’s late-year weakness—investors capitalized on every dip.

This resilience pushed the S&P 500 and Nasdaq Composite to their best performances in years.

S&P could go as high as 7,500-8,000 under optimal conditions

Market strategists have differing views on 2025.

On average, the S&P 500 is expected to rise by about 7%, with targets clustering between 6,500 and 6,700, according to Bloomberg data.

However, according to a report by Barron’s, several experts are projecting a more dramatic climb.

John Stoltzfus of Oppenheimer Asset Management forecasts the S&P 500 could reach 7,100, driven by AI’s transformative impact.

Others, like Société Générale’s Manish Kabra, suggest the index might hit 7,500 or even 8,000 under optimal conditions.

“AI is akin to the invention of the car in the 1920s, revolutionizing productivity,” Stoltzfus explains. “Its potential to solve pressing challenges across sectors could significantly boost economic output.”

Deregulation and tax cuts under Trump could boost earnings across sectors

A key driver of bullish forecasts is Trump’s incoming administration, which promises aggressive deregulation and tax cuts.

From slashing corporate tax rates to dismantling restrictive regulations, these policies could boost earnings across sectors.

Industries like financials, energy, and manufacturing are expected to benefit the most.

Deregulation in these areas could reverse decades of sluggish productivity, especially in manufacturing.

For energy, relaxed emissions rules could translate into higher profitability.

The financial sector may see the loosening of restrictions on credit-card fees and “buy now, pay later” services, among others.

Kabra estimates these measures could lift earnings per share by 2%-3%.

Lessons from the dot-com bubble

While the outlook appears promising, some analysts warn of potential risks reminiscent of past bubbles.

The dot-com boom of the late 1990s saw consecutive 20% gains, only to culminate in a painful crash in 2000.

Benjamin Bowler of BofA Securities likens the current euphoria to the intro of a bubble.

“Booms result in bigger busts,” he cautions. High valuations, coupled with rising volatility, could make the market more unpredictable.

Historical data also suggest that back-to-back 20% annual gains are rare.

Only three such streaks exist, with two ending in sharp downturns. Could 2025 mark another turning point?

How Fed’s moves shape the market?

The Federal Reserve remains a wildcard.

With further rate cuts expected in 2025, the Fed aims to balance economic growth against inflation risks.

However, any resurgence in inflation could force a policy reversal, potentially derailing the market’s momentum.

Edward Yardeni of Yardeni Research predicts that dovish monetary policy could push the S&P 500 toward 7,000 but acknowledges the increased likelihood of a correction if inflation heats up.

“Rate cuts are a double-edged sword,” Yardeni notes. “While they boost growth, they also risk overheating the economy and inflating asset bubbles.”

AI revolution: The driving force behind optimism

AI’s growing integration into industries has been a cornerstone of market confidence.

Unlike the speculative frenzy of the dot-com era, today’s AI investments promise tangible productivity gains.

Adam Parker of Trivariate Research emphasizes that the S&P 500’s evolving composition—dominated by tech and high-margin firms—justifies higher valuations.

He points to AI as a catalyst for unlocking efficiencies in data processing, supply chain management, and innovation.

“AI could make today’s valuations look cheap,” Parker asserts.

“The question is whether earnings growth will keep pace with expectations.”

Navigating 2025: Strategies for Investors

As the market prepares for a potentially volatile year, experts recommend strategic positioning:

  • Focus on economically sensitive sectors: Consumer cyclicals, financials, and materials offer growth opportunities as global activity picks up.
  • Consider options for hedging: With rising volatility, options strategies may offer a cost-effective way to mitigate downside risks.

Risks on the horizon: Tariffs, inflation, and recession fears

While optimism dominates, significant risks could disrupt the rally.

Tariffs and trade tensions under Trump’s administration could erode corporate profits.

Additionally, rising unemployment and muted capital spending raise the spectre of a recession.

Peter Berezin of BCA Research highlights these concerns, arguing that tax cuts alone won’t spur business investment.

“We’re on a path to recession regardless,” he contends, citing Trump’s contentious policies as potential headwinds.

The path forward: Embracing discomfort

For investors, navigating 2025 will require a mix of optimism and caution.

High valuations and policy uncertainties make for an unpredictable environment, but the convergence of deregulation and AI-driven growth offers unique opportunities.

“Investing in a bubble demands resilience,” Bowler advises. “Volatility is likely to rise, but so is the potential for substantial gains.”

Whether the market soars or stumbles, one thing is clear: 2025 will be a pivotal year for shaping the future of investing.

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These 2 emerging markets stocks could return 50% each in 2025

HSBC says emerging markets could prove to be relatively “less vulnerable” as President-elect Donald Trump proceeds with raising tariffs on foreign goods in 2025.

EMs typically have better growth dynamics than the developed markets which justifies a “small overweight” in their stocks.

The investment firm is particularly bullish on two names: XP and Cemex, each of which, it’s convinced, could rally over 50% next year.

Let’s take a closer look at why HSBC is bullish on these two emerging markets stocks.

XP Inc (NASDAQ: XP)

XP has been cut nearly in half in 2024 but HSBC analysts expect the coming year to be a different story altogether. Their $25 price target suggests a whopping 90% upside from current levels.

HSBC finds XP stock “quite correlated to the policy rates cycle in Brazil” as it has a multitude of offerings, including equities, real estate investment trusts, fixed income, and pension plans.

The investment firm expects the Brazilian firm to benefit as the country’s central bank slams the breaks on raising interest rates in 2025.

HSBC likes XP shares also because the company “continues to show resilient earnings performance.” Its per-share earnings have grown at an estimated compound annualised rate of about 12% between 2022 and 2024.

In November, the Brazilian company said its revenue went up 4.0% on a year-over-year basis in its third fiscal quarter.

A lucrative dividend yield of 4.86% makes XP stock all the more exciting to own for the long term, according to HSBC analysts.

Cemex SAB de CV (NYSE: CX)

HSBC does expect the new US government to weigh on demand for Cemex products.

But the investment firm still recommends owning shares of the Mexican firm as the market is a bit too pessimistic on Cemex.

In fact, the US operations of this building materials company could benefit as Donald Trump raises import tariffs on other countries. That segment will likely make up 35% of Cemex’s EBITDA in 2025, according to HSBC.  

Cemex stock is currently going for 4.6 times its estimated enterprise value to EBITDA for 2025 which translates to a 35% discount compared to the company’s 10-year historical average of 7 times.

Holcim – its primary global competitor is also trading at 8.6 times EV/EBITDA at writing.

“With its strong pricing power and exposure to US infrastructure spending, we see significant rerating potential as Mexican macro concerns ease,” the investment firm told clients today.

HSBC recommends buying Cemex shares and sees upside in them to $9 which indicates potential for a more than 60% upside from current levels.

Much like XP Inc., Cemex is also a dividend-paying stock, with a yield of 1.12%.   

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Brazil’s IBC-Br index reports weakest growth in three months at just 0.1% in October, exceeding forecasts

The IBC-Br Index of Economic Activity in Brazil, a key indicator of economic performance, rose 0.1% month on month in October 2024.

This increase comes after a significant revision to September’s numbers, which showed a healthy expansion of 0.9%.

While October’s slight increase was disappointing, it exceeded market forecasts, which predicted a 0.2% fall.

However, this new data represents the worst month of growth since a 0.3% decline in July, indicating possible hurdles for the Brazilian economy.

The slow performance seen in October can be attributable mostly to reductions in important sectors such as industrial production and retail sales.

Industrial output fell 0.2%, in sharp contrast to the 1% increase achieved in September.

Similarly, retail activity slowed, rising only 0.4%, compared to 0.6% the previous month.

These numbers show that domestic consumption and industrial demand may weaken, raising analysts’ concerns about Brazil’s economic resiliency in the face of global uncertainty.

Services sector displays unexpected strength

Despite the sluggish industrial and retail performance, the services sector outperformed expectations.

The services industry, which accounts for around 70% of Brazilian economic activity, expanded by an outstanding 1.1% in October, following a significant 1% growth in September.

This unexpected increase in services came as a relief, implying that, at least for the time being, consumer spending remains strong in this sector.

It may be boosted by ongoing recovery efforts following the epidemic and rising demand for services such as hospitality and healthcare.

The performance gap between the services and manufacturing sectors reveals an important facet of Brazil’s economic landscape: while the country continues to face industrial issues, consumer services may be more resilient.

This trend could substantially impact future economic policies and tactics targeted at promoting growth in the overall economy.

Year-on-year growth indicates recovery

On a non-seasonally adjusted basis, the IBC-Br Index increased by an impressive 7.3% from October 2023.

This significant gain represents a strong year-on-year recovery, demonstrating the Brazilian economy’s resilience as it continues to recover from the effects of prior economic downturns.

Furthermore, when looking at growth over the previous 12 months, the IBC-Br showed a healthier 3.4% growth rate, indicating a progressive recovery trajectory.

These year-over-year figures provide a more optimistic outlook, contrasting with the more subdued month-on-month changes.

They suggest underlying improvements in various sectors as the economy adjusts and stabilizes, despite the short-term fluctuations witnessed in recent months.

Outlook: upcoming challenges and opportunities

Looking ahead, Brazil’s economy faces various hurdles as it navigates local and foreign pressures.

The reductions in industrial output and retail activity raise concerns that the recovery may not be uniform across all sectors.

Economic analysts emphasize the significance of continued government assistance and targeted investments to boost growth in manufacturing and retail, which are critical components of the broader economy.

Furthermore, as the global economic environment becomes more unstable, relying just on the service sector may be insufficient to maintain growth.

Policymakers and business leaders must identify ways to boost industrial productivity, promote investment, and strengthen resilience to external shocks while also supporting the rising services sector.

In conclusion, while October’s performance indicates a critical fall in Brazil’s economic activity, considerable year-on-year improvements and excellent performance in services point to underlying strengths.

A strategic focus on rejuvenating the industrial and retail sectors should pave the way for more balanced growth in the coming months as Brazil navigates its way to a more sustainable economic future.

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Argentina’s economy contracts 2.6% in Q3 2024, but shows signs of recovery

Argentina’s economy has just suffered a significant setback, contracting by 2.6% in the third quarter of 2024 as compared to the same period the previous year.

This is a noteworthy milestone since it represents the sixth consecutive quarter of year-on-year contraction in Gross Domestic Product (GDP), depicting a bleak picture of economic stagnation.

However, despite this dismal result, there has been a remarkable development: the country’s GDP increased by 3% over the previous quarter.

This positive change suggests a departure from the technical recession that has plagued the economy since the latter part of last year.

While the current scenario provides a complicated, mixed picture; it also represents an ongoing battle against deep-rooted economic issues while also pointing at a weak but potential route to recovery.

In assessing current economic conditions, new figures issued by the INDEC statistics agency show a consistent pattern of decline.

Specifically, economic activity fell by 3.3% year on year in September, 3.7% in August, and 1% in July 2024.

At this steady pace, it is clear that Argentina’s economy is still struggling with significant inertia toward recession, despite efforts by the government to stabilize and reorient the country’s economic trajectory in the face of these obstacles.

Javier Milei’s administration and its impact

The administration of Libertarian President Javier Milei has taken many severe and radical measures to reduce public spending and pursue a contentious plan for mass layoffs in the public sector.

While these measures are meant to reduce inflation and strengthen public finances, they have resulted in a significant decline in economic activity across a variety of sectors.

As a result, despite these rigorous measures, Argentina now has one of the world’s highest inflation rates, reaching an amazing 166%.

The consequences of these austerity policies have been severe, resulting in a rise in poverty rates that currently exceed an alarming 50%.

This complicated situation calls into doubt the social consequences of Milei’s economic reforms, raising worries about the policies’ long-term viability in light of their widespread detrimental effects on the populace.

Nonetheless, Milei’s administration has received some credit for its efforts to restructure state finances, which have long been hampered by widespread and unsustainable public expenditure.

However, the ultimate success of these changes will be determined by the government’s ability to successfully and positively revive and revitalize Argentina’s struggling economy.

Future expectations: is there a light at the end of the tunnel?

Eugenio Mari, head economist at Fundación Libertad y Progreso, believes that an expected 3% increase in GDP over the preceding quarter indicates that a recovery trend could strengthen in 2025.

“Let’s hope this trend solidifies in 2025,” Mari said to Reuters, offering a ray of light in an otherwise dark and volatile economic scene.

These estimates highlight the durability and potential for growth that may arise if conditions are favourable.

The government’s plans, as evidenced by the draft budget for the coming year, are for an aggressive 5% GDP growth objective in 2025.

However, achieving these goals will be a daunting task, especially in an atmosphere marked by increased market scepticism and social pressures.

The route forward will include not only prudent economic management but also a solid strategy for regaining the trust of both citizens and investors.

Importance of investment and confidence

Investors’ and residents’ faith in the government’s policies and governance is critical to any economic revival.

While Milei’s administration has taken strong moves to address the current crisis, the successful implementation of effective, long-term reforms will be vital to preventing the country from falling back into recession.

The urgent need to create jobs and effectively address rising poverty rates cannot be stressed; any delays in encouraging economic recovery are likely to have severe consequences for the people as a whole and could exacerbate social dissatisfaction.

Even while considerable progress has been achieved in restoring public finances, Argentina’s economic prospects are nevertheless hampered by the weight of history.

Authorities face the difficult task of striking a delicate balance between enforcing required austerity measures and encouraging incentives that support growth and investment.

Creating an economic environment that encourages thriving firms while also improving the living standards of ordinary residents will be critical for long-term success and stability.

Argentinian economy: a mosaic of contradictions and challenges

Overall, Argentina’s current economic condition is a complicated mosaic of contrasts and obstacles.

While the year-on-year decrease in GDP is troubling and symptomatic of long-term concerns, indicators of economic expansion recorded in the previous quarter provide a preliminary indication of a potential rebound on the horizon.

President Javier Milei’s government faces enormous obstacles, not only in managing the complexities of the economy but also in addressing and alleviating the socioeconomic situations that impact the people.

The road to recovery may be difficult and plagued with challenges, but it is not impossible if it is traversed with caution, unshakable devotion, and a clear long-term vision for economic and social revitalization.

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What made Evgo stock pop 10% on Friday?

Evgo Inc (NASDAQ: EVGO) is up 10% in premarket on Friday after securing a $1.25 billion guaranteed loan facility from the US Department of Energy (DOE).

Evgo will use this loan to set up another 7,500 fast-charging stalls across the United States.

Following the buildout, the company will have a network of about 10,000 electric vehicles charging stations.  

Despite today’s rally, Evgo stock is down close to 25% versus its year-to-date high.

Why does the DOE loan matter for Evgo stock?

Evgo wants to own and operate the aforementioned total of 10,000 fast-charging stalls by 2029.

The company is essentially targeting a more than three-fold increase in its network footprint over the next five years to further strengthen its name as a leader in EV infrastructure.

“We are well-positioned to deploy the infrastructure needed to support both current and future domestic investments in transportation electrification,” Evgo chief executive Badar Khan said in a press release today.

The news arrives only days after Evgo and automotive giant General Motors were reported to have surpassed 2,000 co-branded fast-charging EV stations in the US.

Versus its year-to-date low, Evgo stock is currently up a whopping 250% at writing.

JPM remains bullish on Evgo Inc

Evgo expects to create more than 1,000 new jobs in the US as it uses the government loans to build new fast-charging stalls for electric vehicles.

The DOE announcement, as per JPMorgan analysts, was nothing short of an “early holiday gift” for Evgo shareholders.

The loan facility will serve as a material positive catalyst for the company’s share price, they added.

JPM expects Evgo to focus on execution to achieve operational milestones that will in turn boost financials and unlock further upside in the EV stock.

“Unlike hardware-software peers, Evgo’s fast charging owner-operator model has been scaling well with higher utilization and charge rates in the current muted EV environment,” according to the investment firm.

Evgo stock does not, however, pay a dividend at writing.

Are Evgo shares out of any further upside now?

JPMorgan expects Evgo to benefit from “higher utilization on every charger on its network”.

Last month, the company reported a 92% annualised growth in revenue to $67.5 million for its third financial quarter, indicating solid demand for its fast-charging stalls.

The record-breaking quarter showed improvement in adjusted EBITDA as well. Evgo has a customer base of more than 1.2 million at writing.

More importantly, Evgo also raised its guidance for revenue in November. CEO Badar Khan told investors at the time:

Evgo is poised to lead the industry as the charging provider of choice. We’re working diligently to drive our next phase of growth and deliver continued and sustainable value creation to our shareholders.

Our market expert Crispus Nyaga expects Evgo stock to surpass $12 in 2025.  

The post What made Evgo stock pop 10% on Friday? appeared first on Invezz

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