EWW Stock Recent News

Hello! This is MarketWatch reporter Isabel Wang bringing you this week's ETF Wrap. In this week's edition, we look at some of the ETF sectors that were in spotlight during former President Donald Trump's presidency to see what a second term could mean for these funds.

The iShares MSCI Mexico ETF is a good way to gain exposure to the Mexican market, with potential upside and strong corporate earnings growth. The nearshoring phenomena should add more than 1% to structural GDP growth that drives industrial production and consumer demand. The start of an easing cycle from 11% to 9% should also add fuel to equity valuations.

EWW provides exposure to Mexican majors, but we worry about the impact of minimum wage increases on earnings of Mexican corporates. Consumer staples and financials are attractive due to economic resilience and potential benefits from higher interest rates. However, the substantial minimum wage increase that affects 33% of the workforce is possibly a major earnings headwind, especially with global recessions still on the table. Pass on EWW.

Latin American stocks have performed well in 2023, with ETFs from Brazil, Argentina, and Mexico outperforming the S&P 500. The iShares MSCI Mexico ETF is recommended as a buy, with value still seen in the south-of-the-border portfolio. EWW has a concentrated portfolio and high exposure to consumer staples, but its low valuation and strong momentum make it an attractive investment.

The final trades of the day with CNBC's Melissa Lee and the Fast Money traders.

iShares MSCI Mexico ETF is facing potential volatility due to Mexico's interest rate roadmap and the vehicle's weighting structure. Mexico's sluggish growth and reliance on foreign trade may hinder the ETF's performance. The EWW ETF has concentration risk, underwhelming price multiples, and is exposed to elevated risk premiums.

EWW has performed well due to resilient exposures and a strong Mexican Peso. The ETF has significant exposure to consumer staples and financials, which have matched inflation rates or benefited from higher interest rates. The Mexican economy's lack of leverage and capacity for hawkishness make it less vulnerable to the negatives of higher rates.

Mexico has been well established as a center of integrated manufacturing supply chains, particularly around assembly, for the North American market. Mexico has managed to avoid many US tariffs, and its share of US imports of semi-articulated truck trailers increased to 87.2% in the 12 months to May 31, 2023, from 70.5% in 2016.

Amy Oldenburg, Head of Emerging Markets Equity at Morgan Stanley, discusses how to invest in emerging markets.

The market discount sees a Mexican central bank rate cut from November. We agree, and we in fact can see rates being cut faster than the market discounts thereafter.