The close relationship between politics, economics and financial markets becomes more evident in each electoral process. The uncertainty posed by the election of a new president and the configuration of Congress that the next government will face affects the different economic scenarios, the configuration of risks and the projections for the main financial variables. In concrete terms, the formation of expectations of the different economic agents plays a key role in the determination of market prices. In this context, uncertainty has free rein to generate distortions in prices, causing concern among market actors. The adjustment observed in the financial variables after knowing the results of the first presidential round is an example of this. Between the Friday before the elections and the Monday after, the exchange rate, the stock market and the fixed income market rates registered variations that lead to the question of whether or not this electoral result was interpreted favorably by the market. Antonio Moncado S., senior economist at Bci.BciAt the local level, financial variables showed relatively contained premiums for uncertainty in previous weeks. In the case of the exchange rate, the misalignment between its spot level and the equilibrium value (fair value) was between 30 and 40 pesos, considering fundamentals that pointed to a downward trend. At the beginning of trading on Monday, the parity fell around 1.8%, leading some to preliminarily infer that the election result had been taken positively by the market. However, at the close of the day, the parity gradually approached the levels recorded on Friday. The explanation for this phenomenon lies in the fact that the lower uncertainty that the result entailed temporarily alleviated the premiums on the financial variables, giving way to a new formation of expectations that moderated the initial impacts. 
Sovereign rates maintain their downward adjustment after the election result, reflecting the lower political uncertainty. BciUncertainty will continue to be present and we must learn to live with it. In this scenario, fundamental assessments of market prices will be key to meeting the challenge. For now, in the case of the exchange rate, the fundamentals continue to point to downward pressure, although politics will continue to temporarily influence this trend, at least in the short term.
