J.P. Morgan downgraded Mexican stocks due to economic slowdown and U.S. tariffs while upgrading Brazilian equities, citing a potential end to interest rate hikes and supportive measures from China. This reflects diverging economic forecasts for the two nations as investors consider implications for future market performance.
On Monday, J.P. Morgan revised its ratings for Latin American equities, downgrading Mexican stocks due to a deceleration in economic growth and the impact of U.S. tariffs, while upgrading Brazilian equities. The firm raised Brazilian stocks to “overweight” from “neutral,” signaling a more positive outlook, in light of anticipated cessation of interest rate hikes and China’s economic stimulus measures.
J.P. Morgan expressed concerns regarding Mexico’s economic situation, noting, “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 fourth quarter for the first time in over three years, prompting the central bank to anticipate minimal growth this year amidst increasing trade tensions.
The imposition of new tariffs by President Donald Trump on imports from Mexico and Canada has intensified pressures, although he subsequently exempted numerous Mexican imports and some Canadian goods for one month, revealing the complexity of trade policy.
Conversely, J.P. Morgan highlighted that Brazil’s stock market looks increasingly promising, stating, “Brazil might be closer than was expected to end of hiking cycle, which we think is a very important trigger for equities.” The anticipated halt in the central bank’s rate hikes, coupled with Chinese stimulus measures, could invigorate Brazilian equities significantly.
As Brazil’s central bank is expected to implement a substantial rate increase, reaching an eight-year high, analysts believe a slowdown in further hikes may soon follow. Moreover, the ongoing trade conflict between the U.S. and China is expected to provide advantages for Brazil, as it stands as a leading exporter of agricultural goods, likely increasing shipping to China as those markets seek tariff-free options.
In summary, J.P. Morgan’s recent rating adjustments reflect distinct economic trajectories for Mexico and Brazil. The downgrade for Mexican stocks arises from concerns over slowing growth and U.S. tariffs, while the upgrade for Brazilian equities is associated with potential policy shifts and favorable external economic conditions. Investors should closely monitor these developments as they may significantly impact market dynamics in these countries.
Original Source: www.tradingview.com
