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Mexican stocks are expected to remain under pressure, following yesterday’s trend with the S&P/BMC IPC closing half a percent lower.
Investor sentiment could depend on Sheinbaum’s ability to maintain a stable regulatory environment and address the budget deficit left by her predecessor.
Whilst her commitment to central bank autonomy may stabilise the peso and support equity investments, concerns over potential judicial reforms and U.S. trade risks could increase market volatility.
Deputy Governor Jonathan Heath of Mexico’s central bank stressed the need for a restrictive monetary policy to tackle persistent services inflation, still above 5%. Although annual inflation dropped to 4.66% in September, the 3% target remains elusive.
After a recent 25-basis point rate cut to 10.5%, future adjustments could depend on U.S. Federal Reserve actions. High rates may weigh on stocks, but lower inflation could restore investor confidence and support a recovery.
Meanwhile, Tropical Depression Eleven-E threatens sectors like agriculture, construction, and tourism, with market sentiment potentially declining due to fears of economic disruption. On the economic front, attention will shift to the release of domestic unemployment figures this Friday. In July, Mexico’s unemployment rate marked a slight uptick from June’s 2.8% value. Increasing unemployment numbers could fuel a more bearish sentiment.
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