South of the Border: Higher Yields and Growth in Mexican Industrial

While there are incremental investment risks in Mexico, Mexican and US industrial share more characteristics than might be expected and the risk premium could justifiably be narrower than called for by sovereign bond spreads.

In today’s shifting landscape of global partnerships, global investors have awoken to the idea that there are other investable markets beyond those in the United States. In the public markets, the irony of investing outside the US is that around 60% of revenues of the global stock markets originate from the US in USD anyway (as compared with approximately the same proportion for companies in the S&P 500), yet the S&P 500’s price-to-earnings (PE) multiple is 9x turns higher than non-US stock indices.[1]

Note from the Author: Between the writing, publishing and reading of this article over the course of the second half of 2025, US-Mexico trade policy will have changed and evolved. The article takes a long-run view and assumes a steady state relationship between US and Mexico under the US-Mexico-Canada Agreement (USMCA) under which trade of qualifying goods is largely tariff-free.

In other words, for a similar amount of US revenue exposure, an investor could buy