Here’s how market watchers are reacting to AMLO’s victory

Andrés Manuel López Obrador won Mexico’s presidential election in a landslide victory on Sunday, putting a leftist in charge of Latin America’s second-largest economy for the first time in decades.

Here is how some market analysts and watchers have reacted to AMLO’s resounding victory:

Paul Greer, emerging markets portfolio manager, Fidelity International

“In our view, AMLO’s pro-growth agenda will ultimately be more benign and investor friendly than the market’s worst fears. With most of the political uncertainty now removed, and the result largely as anticipated, we expect some short-term relief in Mexican markets as pre-election hedges get unwound … and the market focuses on the path towards his inauguration. We think the best value in Mexican markets is in local currency bonds. With domestic inflation like to continue falling over the medium term, the real ex-ante policy rate in Mexico is now one of the tightest in the world and local bond valuations currently look attractive.”

Phillipe Waechter, chief economist, Ostrum Asset Management

“Investors were aware of the changes that will come in Mexico. Therefore, the Mexican peso just moved temporarily on the downside.  Investors do know his program as they discussed a lot before the election day.This and the first soft speech of the new president explain the quite neutral move on financial markets. In his first television speech, Lopez Obrador said that he wanted to respect Mexican institutions notably the central bank independence and the oil deals that were approved under the outgoing president. In other words, he doesn’t want to spontaneously make a revolution in the Mexican institutions. He said that he won’t nationalize companies nor quit NAFTA because it’s in Mexican interest to maintain the current strong links with both the US and the Canada. Mexico is too dependent on its economic partners to exit from this agreement.”

Edward Glossop, Latin America economist, Capital Economics

“The conciliatory tone of [his] speeches following his convincing presidential election victory has been relatively well-received by the markets. But it’s worth cautioning that we still have little clarity on AMLO’s economic policies. We’ll be looking in the coming weeks for indications of the size and nature of any fiscal stimulus or signs of a more interventionist energy policy.”

Jaime Reusche, vice president and senior credit officer, Moody’s

“The López Obrador administration’s policy direction will be somewhat uncertain for the remainder of this year, given Mexico’s lengthy political transition process and the influence of the outgoing administration on the country’s near-term fiscal outlook. The incoming administration will however benefit from a favorable macroeconomic starting point, though ultimately the trajectory of the sovereign rating will be informed by the direction of economic policy and its impact on Mexico’s medium-term growth and fiscal prospects.”

Alberto Ramos, co-head of the Latin America Economic Research, Goldman Sachs

“The key immediate challenge for the president-elect will be to find ways to work constructively with the departing administration in order to generate a smooth handover of power and to avoid the policy communication inconsistencies and contradictions that plagued the campaign. Ultimately, the new administration will be challenged to avoid excessive encroachment on private sector activity and markets to seek market-based solutions to policy and economic challenges and to strengthen and protect independent institutions and autonomous agencies.”

Jason Marczak, director, Adrienne Arsht Latin America Center, Atlantic Council

“There was never much doubt that he would win, but the question now is what the PRI, PAN and PRD do after such a defeat. All eyes will be on Congress and how well the president-elect’s party, Morena, does in these elections. For the United States, this historic moment in Mexico should be seized upon to recalibrate relations with Mexico. Mexicans did not vote based on Washington. But Mexicans did vote for a new president who will be a strong defender of Mexico and of an agenda that prioritizes the concerns of those historically left behind. NAFTA modernization will be a priority of the new AMLO government, but don’t expect him to acquiesce to US demands.”