- The cyclical outlook: a negative shock is already being experienced in the Mexican economy. If the US economy begins to slow, Mexico's weak cycle is unlikely to find a way out in the short term.
- The structural view: As long as the USMCA continues to function as an institution and an economic boundary, North America's economic interests will tend to be in harmony. This places the Mexican economy in a strong relative strategic position. However, it is likely still too premature to say so with any degree of certainty. The world is facing a series of negative shocks, from a sudden shift in economic policy to the definition of a new global political economy. Cyclical and structural risks have certainly not disappeared.
- Our overweight call for local rates gained momentum. Our strategies got a boost after the tariffs announcement. We have been positioned in the 3-7Y tenors of nominal rates and we recently extended our preference for the 2Y (overall, receive local rates).
- We have also been long Udibonos with a preference for the long end of the curve. “Liberation day” has also favoured our strategy and the rally has been focused on both the long and the short end of the curve.
- On the MXN, we have been cautious since 2Q24, and in our Asset Allocation for 2025 (released in November 2024) we turned more neutral.
- Regarding UMSs, we have been neutral, mostly due to our cautious view on the MXN and the increased risks related to the deterioration of the sovereign credit profile. We think that the risk premium could increase further. In our view, the UMS spread vs. UST could continue to increase in 2025.
- On equity, as of writing, our list of top picks has yielded a TR of 11.7% YtD, +1.5pp above the Mexbol's total return. Since we published our strategic report back on 8 December, our list of favourite stocks has yielded an 8.7% TR, +3.8pp above the broader index.
- On Credit, we remain positive on defensive sectors such as consumer goods, utilities (electricity generation), and TMTs, such as AMX. They have returned more than 3% year-to-date.
- On our Asset Allocation, our strategies have been in line with our December 2024 view, as seen in the performance since Trump’s tariffs: (neutral IPC, overweight nominal and real bonds, neutral on UMS. overweight Credit, underweight floaters).