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Cinco de Mayo, meaning the fifth of May in Spanish, is a day of gratification for all Mexicans. The day honors the Mexican army's incredible victory over the French militia in the Battle of Puebla in 1862. Though the victory was short-lived as the French finally took over, the day became commemorative of Mexican ethnicity and is widely celebrated even in the United States.
So, let’s play a mock war between Mexico and France. This mock fight will give investors a fair idea of the present stock market scenario of the two countries.
iShares MSCI Mexico Capped ETF (EWW) – Up 19.3% YTD (as of May 3, 2025)
The Mexican economy can be represented by the pure-play ETF EWW. The Mexican GDP grew by 0.2% sequentially in the first quarter of 2025, rebounding from a 0.6% contraction in the previous quarter and beating market expectations of no growth.
Although the modest quarter-over-quarter growth kept Mexico from entering a technical recession, it fails to alter the broader narrative of economic vulnerability significantly. The outlook remains uncertain amid tight financial conditions and U.S. trade war risks.
On the currency front, the Mexican peso just recorded its biggest monthly advance since 2021, thanks to a reprieve in President Donald Trump’s tariff plan and a decline in the U.S. dollar. Note that Invesco DB US Dollar Index Bullish Fund UUP lost 1.5% over the past month (as of May 3, 2025).
The peso strengthened 4.4% against the greenback in April, outperforming all its main regional peers after Mexico was one of the few countries to be spared Trump’s so-called reciprocal tariffs. But this peso rally is likely to be short-lived as the greenback staring to show strength amid easing global trade tensions. The UUP ETF gained 0.5% last week. The move will go against the Mexican peso.
Overall, growth in Latin America (Latam) is forecast to remain subdued at 1.4% in 2025 and 2.0% in 2026 after a tepid 1.7% in 2024, per KPMG. Given its heavy reliance on U.S. demand and high effective tariff rate, Mexico—one of the region’s most exposed economies—could fall into recession.
The fund EWW currently has a Zacks Rank #5 (Strong Sell).
iShares MSCI France ETF (EWQ) – Up 17.8% YTD (as of May 3, 2025)
On the other hand, the French economy grew by 0.1% sequentially in Q1 of 2025, reversing a 0.1% contraction in Q4 but falling short of market expectations for a 0.2% increase. Subdued household consumption and fixed investment weighed on the growth. A decline in goods purchases was offset by higher spending on services.