JPMorgan downgraded Mexican stocks amid GDP slowdown and trade tensions, while upgrading Brazilian equities due to potential end of interest rate hikes and positive stimulus from China. The contrasting ratings highlight economic challenges facing Mexico and growth prospects for Brazil in the current geopolitical climate.
JPMorgan has made significant changes to its investment ratings, downgrading Mexican stocks due to anticipated economic stagnation and U.S. tariffs, while adopting a bullish outlook on Brazilian equities due to potential interest rate stabilization and economic support from China. The brokerage revised its rating for Brazilian stocks to “overweight” from “neutral,” while downsizing its forecast for Mexican stocks to “neutral” from “overweight.”
Concerns regarding Mexico’s economic performance primarily stem from a notable slowdown in GDP growth. JPMorgan noted, “What is bothering us most on Mexico is the very steep growth slowdown, which is likely to bring GDP to a halt, at least in the first half of the year.” Recent statistics indicate that Mexico’s economy contracted in the last quarter of the previous year for the first time in over three years, prompting economists to predict minimal growth amidst ongoing trade disputes.
The imposition of 25% tariffs on imports from Mexico and Canada by President Donald Trump has further complicated the situation. Although these tariffs were enacted, Trump subsequently exempted many imports from Mexico for a month, reflecting the volatility of the current trade policy environment.
In contrast, JPMorgan sees an optimistic trajectory for Brazilian equities, suggesting they may soon reach the end of the interest rate hiking cycle, a pivotal factor for stock performance. The anticipation of added economic stimulus from China could bolster Brazilian market growth. Currently, Brazil’s central bank is expected to raise the Selic rate by 100 basis points, bringing it to a level not seen in over eight years.
Looking ahead, JPMorgan indicated, “However, it is well possible that one could see a pause after that (referring to the March meeting).” Additionally, the ongoing trade tensions between the U.S. and China are projected to favor Brazil, which is positioned to increase its exports of soy, cotton, beef, and chicken meat to China as those businesses look for tariff-free alternatives.
JPMorgan downgraded Mexican equities due to economic concerns linked to GDP stagnation and U.S. tariffs, while it upgraded Brazilian equities based on potential interest rate stabilization and support from China. The contrasting outlooks reflect broader economic dynamics, emphasizing the impact of geopolitical factors on regional markets. Overall, these investment changes underscore the importance of monitoring economic indicators and trade relations when assessing market conditions.
Original Source: www.tradingview.com
