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On Sunday, November 19, Argentina elected Javier Milei to be its next president in a decisive run-off election. Radical libertarian outsider, Milei, defeated Sergio Massa, the country’s Minister of Economy since August 2022. Voters, investors, and business owners are hopeful Milei’s libertarian policies, which are a drastic divergence from the current policies, will aid Argentina’s recession-prone economy. The country is currently facing inflation topping 140%, interest rates at 130%, dwindling central bank reserves, and a weakening currency regime. However, the grass may not be greener on the other side. Implementing Milei’s policies will be a challenge without a congressional majority, and his abrupt, “chainsaw” approach may backfire. Even Taylor Swift's Eras Tour, which visited Buenos Aires last week, could not boost this economy—is there anything that can?!

The US equity market’s narrow leadership in 2023 is well chronicled, but it’s nearly impossible to overstate.  The “Magnificent Seven”, as the largest seven US stocks have been dubbed, have dominated YTD equity returns—contributing, in effect, 100% of the S&P 500 Index’s total return (through October).

These seven stocks have returned on average 84%, compared to -3% for the “S&P 493”, and more than half of S&P 500 stocks have generated negative returns. In fact, the equal-weight S&P 500® Index is lagging the market-cap weighted S&P 500 by the most since 1998 as the S&P 500 Index is up over 10%, while the equal-weighted S&P 500 was down ~2% through October.

President Bola Tinubu won Nigeria’s presidential election in February 2023 and was faced with the seemingly impossible task of improving the battered economy he inherited. While the legitimacy of Tinubu’s win was contested by many voters, investors welcomed the new administration with open arms as key tenants of Tinubu’s campaign rested on making Nigeria a friendlier investment destination. Tinubu wasted no time getting to work, but a few months into his term, he was falling flat on his promises… or at least that is what it seemed. So, the EMsights team traveled to Nigeria twice in the past few months to learn more!

Kenya’s fundamentals today may be the most exciting they’ve been in decades. Following a peaceful election last August, President Ruto’s new administration has continuously expressed commitment to fiscal consolidation and structural reform that will improve the sovereign’s credit quality. Kenya is supported by the international community, which wants to help fund its success—as most recently evidenced by the IMF’s announcement it will extend further aid to the country (more on which shortly).  So what gives—why do Kenyan asset prices tell such a different story?

The macroeconomic backdrop in emerging markets has been uncertain for some time now—indeed, if anything, uncertainty seems to be increasing. War continues in Ukraine, inflation globally remains sticky (particularly core inflation) and, consequently, global monetary policy is, overall tilted toward tightening (relatedly, the Reserve Bank of Australia announced a surprise hike in early May). And at least partially thanks to tighter monetary policy (which is ongoing, with both the Fed and ECB raising rates again at their recent May meetings), some things have broken—e.g., we’ve seen a cryptocurrency winter, trouble with UK pension funds, concern about global real estate and, most recently, bank failures in the US and Europe.

EMsights team members returned to Washington, D.C., in April for the IMF and World Bank Spring Meetings, conducting some 200 interactions with a swath of government officials and representatives. Frequent readers will recall we similarly attended the IMF and World Bank Annual Meetings last fall—and were unsurprised by the somber mood, given ongoing macro and geopolitical uncertainty.

The Growth team has consistently found health care to be a key area of idea generation given the existence of companies with attractive franchise characteristics experiencing interesting profit cycles. From a franchise standpoint, many health care companies enjoy defensible competitive positions through intellectual property protection, strong brands or leading market share positions. From a profit cycle standpoint, this is an area of constant innovation, and innovation tends to breed profit cycles.

Craig, happy 11-year Artisan anniversary. To commemorate your time at Artisan Partners and with the U.S. Value team, we have a few questions to better get to know you personally and professionally. To break the ice, please tell us a bit about yourself.

I grew up in South Carolina and have lived in the southern US my entire life. One thing that is interesting about my childhood is my dad was a professional golfer on the PGA Tour (he also played the Senior PGA Tour later in life).

EMsights Capital Group believes that economic and political freedoms and rule of law are important precursors for the economic development, growth, education and sustainability of sovereign countries. Through active due diligence, including on-the-ground country visits, in-person meetings with political, business and government officials, and daily monitoring of political and financial news, we actively follow a country’s pursuit and execution of fair and free elections, civil liberties, functioning of government, and the importance it places on economic freedom in real-time – in both its rhetoric as well as its enforcement of these principles.

Over the past year, Egypt made headlines as it worked to navigate through a challenging macroeconomic operating environment and high external financing needs. In particular, the recent surge in US Treasury yields gave rise to the harmful narrative that “markets are closed” to countries like Egypt that would need to price new issuance yields in excess of 10%. We think this narrative has been harmful as it incentivizes countries to wait until they are facing significant time pressure. Instead, we believe countries should take a long-term view, recognizing that yields move around, and begin to formulate financing plans that acknowledge the reality of current market pricing.