Mexican Equities Are Beating Russian Peers in a Trump Trade ReversalBy
Performance gap had swelled to more than 40 percentage points
Renewed slide in oil a major headwind for Russian equities
A famous international version of the “Trump Trade”in equities has now completely reversed.
For the first time since the U.S. election, the iShares MSCI Russia Capped ETF (ticker ERUS) trailed the iShares MSCI Mexico Capped ETF (ticker EWW), ending a stretch of outperformance that swelled to more than 40 percentage points in early January.
EWW is up 2.6 percent since Nov. 8, while ERUS is down 1 percent, as of Wednesday’s close.
Trump often criticized Mexico during the campaign -- especially on matters of trade. Building a wall along the U.S. southern border was his number one promise. Conversely, he’s been cordial to Russia, saying as president-elect that “only stupid people or fools” wouldn’t want the U.S. to have a good relationship with the country.
Since assuming office, news reports regarding the investigations into his campaign associates’ ties to Russia have, according to Trump, made it difficult to strike deals with Russian President Vladimir Putin. A renewed slide in oil prices to levels not seen since November and the U.S. Senate’s vote to possibly expand sanctions on Russia have also weighed heavily on the country’s equities.
Meanwhile, the administration has yet to pursue major protectionist actions along the southern border of the U.S., relieving the pressure on Mexican financial assets.
In what may be the best illustration of the famous “sell the news” maxim in recent history, the peso’s all-time closing low relative to the U.S. dollar happened the day before Trump was sworn into office.
Charlie Bilello, director of research at Pension Partners, brought this round-trip to our attention.
“Mexico is now outperforming Russia since the election,” he tweeted. “The reversal of the false narrative is complete.”