Even with the good results of the stock market, which is currently up 15% year-to-date (YTD), emerging market alternatives in Latam have managed to surpass this rise.

Otavio Costa, a macro strategist at Crescat Capital, called this growth into attention, reporting that the iShares Latin America 40 ETF, which tracks the value of the 40 largest companies in Latam, was up over 45% YTD.

These numbers surpass SPX figures comfortably, and for Costa, mark a transformation in Latam markets as the region experiences a “profound structural transformation.”

Costa stated:

Latin America is open for business, and the US administration increasingly recognizes the region’s importance in supplying the natural resources critical to current technological advancements and reshoring efforts.

Costa stressed that this success was not isolated, and the momentum of these companies was poised to spread all across the region, which is also experiencing relevant political changes.

He considers Argentina and El Salvador examples of this transformation, which can also spread to Bolivia after its recent presidential election, and might even include Chile.

The profitability of Latam stocks shows they can be a reliable alternative for U.S. investors as they seek to hedge their local bets with foreign picks. Directing only a small portion of U.S. investors towards these alternatives would explode the market capitalization of companies in Latam, which would experience a boom.

Nonetheless, while opportunities are indeed present, challenges still remain, as the region has been traditionally linked with instability.

While Latam’s markets are currently booming, there are still significant barriers separating these emerging markets from becoming an effective hedge. As the region evolves and undergoes significant changes, the level of trust in these markets can rise, and more money can flow into them.

• How has the stock market performed year-to-date compared to Latin American markets?
  While the stock market is up 15% YTD, the iShares Latin America 40 ETF has surged over 45% YTD, surpassing the broader market growth.
• What factors contribute to this significant growth in Latin American stocks?
  Macro strategist Otavio Costa attributes this rise to a “profound structural transformation” in Latin America, fueled by the region’s critical natural resources for technological advancements.
• Which countries in Latin America are exemplifying this transformation?
  Costa highlights Argentina, El Salvador, and potentially Bolivia and Chile as countries undergoing significant political and economic changes that could further drive growth.
• What challenges might affect U.S. investors considering Latin American stocks?
  Despite the current profitability, traditional instability in the region poses risks, affecting the potential for Latin American markets to serve as effective hedges for U.S. investors.

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