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For a rustic that has been the goal of US President Donald Trump’s ire over commerce, medicine and migrants, Mexico is proving surprisingly resilient. The nation’s benchmark IPC inventory index is up 7 per cent this 12 months, in contrast with the S&P 500’s 4 per cent drop and Canada’s TSX index’s 1.8 per cent acquire. The peso has additionally held up nicely, rallying 2.5 per cent in opposition to the greenback since January.
It is a testomony to Mexico’s newly elected President Claudia Sheinbaum’s ability to navigate tensions and negotiate a delay on tariffs for the nation’s exports. If this continues, Mexico’s belongings might find yourself being amongst 2025’s sudden winners.
Betting on Mexico’s fairness market shouldn’t be as counterintuitive because it sounds. True, the 2 international locations’ financial ties run deep: 82 per cent of Mexico’s exports went to the US final 12 months. Nonetheless, its publicly listed corporations are largely domestically targeted, leaving them comparatively sheltered from direct tariff danger.
Mexican shares have additionally grow to be low cost. The nation’s inventory market fell 13 per cent final 12 months. Sheinbaum’s landslide victory final summer season had spooked traders, who fearful that her promise to increase the welfare insurance policies would widen the nation’s price range deficit and overwhelm on financial progress. Trump’s return to the White Home added to considerations. The IPC index is buying and selling at a price-to-earnings ratio of simply 11 instances, beneath its historic common of about 14-15 instances.
This leaves room for upside — supplied Sheinbaum can proceed to carve out reprieves from US tariffs. In contrast to Canada’s Justin Trudeau, who stepped down as prime minister this month, Sheinbaum has been deft at studying and dealing with her US counterpart. Moderately than buying and selling barbs and retaliatory threats, she has emphasised co-operation and Mexico’s efforts to safe the border and combat fentanyl trafficking. That was sufficient to earn Trump’s respect: he has referred to as her “powerful.”
Long term, the danger for Mexican equities is that the results of the commerce battle might begin trickling by the actual economic system into home consumption. Analysts at Capital Economics reckon a 25 per cent tariff on all US imports from Mexico might end in a 1 per cent contraction of the economic system. However for now not less than, traders appear to belief that Sheinbaum’s strategy to Trump is the best one.
