Mexican Peso and Stock Markets Falter as Trump’s Second Term Looms

The Mexican peso and stock markets have faced significant challenges since the U.S. elections on November 5, 2024. Donald Trump’s imminent inauguration for his second term as President of the United States has sparked market unease.

His trade and immigration policies have caused concern among investors. According to Banco de México (Banxico) data, the peso has depreciated by 3.46% from November 5 to January 17.

It moved from 20.0788 pesos to 20.7753 pesos per U.S. dollar, a difference of 69.65 cents. The Mexican currency’s vulnerability has been exacerbated by the strength of the U.S. dollar.

The dollar has gained ground against its peers due to expectations that Trump’s policies could boost inflation. This comes at a time when the U.S. economy is already robust. The Mexican peso ranks sixth among the most depreciated currencies during this period.

Mexican stock markets have also experienced setbacks. The S&P/BMV IPC, the main index of the Mexican Stock Exchange (BMV), has fallen by 1.75%. It now stands at 49,940.89 points, down from 50,831.51 points.

The FTSE-BIVA index has dropped by 3.42%, moving from 1,047.47 to 1,011.68 points. Analysts at Monex Casa de Bolsa emphasize the importance of Trump’s inaugural speech.

Trump’s Impact on Bilateral Relations and Market Dynamics

They cite his history of statements and policies towards Mexico as a cause for concern. During his campaign, Trump threatened to impose 25% tariffs on all Mexican imports. He also promised to renegotiate the USMCA and carry out mass deportations.

These pledges, combined with his statements on border security, have created uncertainty about the future of bilateral relations. Trump plans to designate Mexican drug cartels as “terrorist groups.”

Mexican companies have seen significant stock price declines. José Cuervo, the world’s largest tequila producer, has experienced the worst performance. Its shares have plummeted by 27.47% to 19.35 pesos per unit since November 5.

In contrast, Wall Street has shown positive performance since the U.S. elections. The Dow Jones Industrial Average has gained 3%, reaching 43,487.83 points. The S&P 500 has risen by 6.46% to 5,996.66 points.

The Nasdaq Composite has also increased by 3.70% to 19,630.20 units. Tech companies have shown double-digit returns. Tesla, led by Elon Musk, has surged by 69.62%.

Alphabet, the software developer, has risen by 15.60%. Amazon, the e-commerce giant, has advanced by 13.25%. Oil prices have also seen gains. Brent crude has increased by 7.50% to $77.39 per barrel.

West Texas Intermediate (WTI) has risen by 6.96% to $80.79. The Mexican export blend has advanced by 8.86% to $73.01. Precious metals have fallen. Gold has decreased by 1.69% to $2,697.11 per ounce.

Silver has dropped by 5.92% to $30.98. Copper has also retreated by 5.59% to $9,193 per ton. Bitcoin, the largest cryptocurrency, briefly touched $106,000 per unit over the weekend.

This brought it close to its all-time high of $107,000. Since November 5, Bitcoin has gained approximately 52.63%. Spot Bitcoin ETFs marked their second consecutive day of net capital inflows last week.