JPMorgan Adjusts Ratings: Downgrades Mexican Stocks, Upgrades Brazilian Equities
JPMorgan has downgraded Mexican stocks due to slow growth and U.S. tariffs, while upgrading Brazilian equities amid potential interest rate stabilization and Chinese economic stimulus. The changes indicate a cautious outlook for Mexico and a favorable outlook for Brazil’s market opportunities.
On Monday, JPMorgan downgraded its outlook for Mexican stocks due to concerns about slowing economic growth and the impact of U.S. tariffs. Conversely, the brokerage adopted a positive view on Brazilian equities, motivated by the potential cessation of interest rate hikes and Chinese stimulus measures. As a result, they upgraded Brazilian equities from “neutral” to “overweight” while downgrading Mexican stocks from “overweight” to “neutral.”
JPMorgan expressed particular concern regarding Mexico’s economic trajectory, stating, “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 data revealed that Mexico’s economy contracted in the final quarter of last year, marking its first decline in over three years. Analysts predict sluggish growth for the current year amid ongoing trade tensions and economic challenges.
The context includes the implementation of new tariffs, notably a 25% tariff on imports from Mexico and Canada initiated by U.S. President Donald Trump. Although Trump later exempted several imports from these countries for a month, the trade policy remains unpredictable.
Conversely, JPMorgan sees potential in Brazilian equities, noting, “Brazil might be closer than was expected to end of hiking cycle, which we think is a very important trigger for equities.” Moreover, the firm highlighted the positive impact of China’s anticipated stimulus measures on the Brazilian market.
Brazil’s central bank is expected to impose a third successive 100-basis-point increase in the benchmark Selic rate later this month, setting it at a peak of 14.25%, although JPMorgan anticipates a possible pause in rate hikes after March. Trump’s ongoing trade disputes with China are predicted to benefit Brazil, the leading global exporter of key commodities, as those businesses will likely seek tariff-free imports.
In summary, JPMorgan’s recent adjustments reflect a cautious outlook for Mexican equities in light of economic challenges and tariffs, while simultaneously identifying Brazilian equities as an attractive investment due to stabilizing interest rates and potential boosts from international trade dynamics. The contrasting outlooks underscore the volatility of the Latin American markets amidst global economic shifts.
Original Source: www.tradingview.com
