By Reshma Kapadia

The odds of an interest-rate cut in the U.S. may be fading but Mexico's central bank trimmed rates last week, and strategists say it has room to do more on that front. That may warrant a bullish outlook on Mexican stocks at a time many emerging markets are getting hit hard.

While the iShares MSCI Emerging Markets exchange-traded fund is up just 1% so far this year, returning most of its strong gains after the conflict in Iran, Mexican shares have held up better. The iShares MSCI Mexico ETF is up 4% for the year.

BCA Research analysts see Mexico's stocks, peso and bond markets poised to outperform peers. One big reason: Investors have underestimated the room the Bank of Mexico has to cut rates further after its 25 basis point reduction last week -- especially when compared with the Federal Reserve, which is walking a tightrope between slowing growth and rising prices due to the conflict in Iran.

Unlike some other emerging markets, especially those in Asia that were reliant on chemicals and oil from the Strait of Hormuz, inflation isn't raging in Mexico. In a note to clients, BCA strategists tell clients that Mexico is well-placed to beat the emerging markets index, citing its strong economic fundamentals and lack of financial excesses.

Another source of support: President Donald Trump administration's focus on the Western Hemisphere is bringing investor attention to the region. Trump has repeatedly called out his strong relationship with President Claudia Sheinbaum, which puts Mexico in good position to benefit as investment opportunities come back to the region.

At the Saudi-organized FII Priority summit last week in Miami, several investors put the spotlight on Latin America. During a panel, Shu Nyatta, co-founder of Bicycle Capital who previously worked at SoftBank, said he has invested in the region when the ecosystem has ranged from $3 billion to as high as $17 billion since 2017 -- and back toward $3 billion more recently. But he sees potential ahead: "When the U.S. is interested in Latam, it gets a ton of capital," he said.

Former Treasury Secretary Steven Mnuchin, who is the founder of private-equity firm Liberty Strategic Capital, on a conference panel echoed the optimism, noting "some of the greatest growth opportunities" he had seen in a long time. He highlighted Mexico in particular as the country moved closer to the U.S . in terms of policy and businesses saw an opportunity to invest there.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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March 30, 2026 14:54 ET (18:54 GMT)

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