Sharp decline in stocks and bonds after MSCI's decision to maintain Argentina as a standalone

Argentine financial markets reacted with widespread declines on Wednesday following the publication of the MSCI's semiannual report, which decided to maintain Argentina in the "standalone" category (an isolated market) , postponing its potential return to the Frontier or Emerging market categories . The decision had an immediate impact on stocks and bonds, as expectations of inflows of international funds declined.

The S&P Merval index fell 1.8% to 2,027,000 points, while dollar-denominated sovereign bonds—both Bonares and Globales —fell an average of 0.3%, breaking a three-day winning streak.

The MSCI reclassification is key to accessing international capital flows. Without changes, Argentina will remain off the radar of passive funds that track its indices, limiting the entry of institutional investments. According to the consulting firm Cocos Gold, the decision not only affects local stocks but also, although to a lesser extent, corporate and sovereign bonds.

" This directly affects the liquidity and visibility of our stocks , and to a lesser extent also impacts corporate and sovereign bonds, since anything that alienates global institutional investors works against us," said Agustina Savoia , financial advisor.

The MSCI report did not include Argentina in the list of countries under review, which implies that any change in its status could not be evaluated until June 2026 , with a possible reclassification as a Frontier or Emerging market in 2027.

" To improve your ranking, it's not enough to have good fundamentals or cheap assets. You need operational accessibility, predictability, free movement of capital, and clear rules. These are minimum conditions that Argentina still doesn't meet, " Savoia added.

In the United States, markets traded with slight variations, supported by expectations of interest rate cuts. The Nasdaq, driven by technology stocks, rose nearly 0.6%, while the S&P 500 gained 0.2% and the Dow Jones remained little changed.

Federal Reserve Chairman Jerome Powell 's remarks before Congress boosted risk appetite. Powell stated that the agency could act "sooner rather than later" on rate cuts, prompting renewed calls for monetary easing.

Meanwhile, traders are awaiting the release of the Personal Consumption Expenditures (PCE) index, the Fed's preferred inflation indicator, scheduled for Friday. A slight month-over-month increase is expected in the "core" measure, excluding food and energy.

On the geopolitical front, markets are closely monitoring the truce between Iran and Israel brokered by the Trump administration . The absence of new attacks helped stabilize crude oil prices. Brent futures recovered from their biggest two-day drop since 2012, trading above $66. Meanwhile, WTI was trading below $65.

The calmer climate in the Middle East, coupled with signs of easing U.S. monetary policy, contrasts with the slowdown facing the local market due to the continued "standalone" status, which limits the entry of institutional investors and leaves Argentine assets more exposed to volatility.