The U.S. hegemony in terms of stock market performance has been clear since the great financial crisis. That consistency has allowed valuations to be above normal and above other markets for an extended period of time, to the point where we have reached extremes. In the chart below, you can see the valuation differential between Latin America stocks and U.S. stocks and how cheap LatAm stocks are when measured by Free Cash flow yield. The last time they were that cheap was 30 years ago, and as you can see, they experienced one of the biggest expansions in history, until the GFC. There is an additional big difference now: excluding Argentina that is going through an economic and social transformation, Latin American countries have on average a 65% debt to GDP, vs 124.3% for the US. Balanace sheets are cleaner, valuations are cheaper and debt is lower. How much and for how long does the political landscape of the region weighs on investors decisions to take advantage of this opportunity?
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