If US manufacturing is to be less dependent on China, we think the path will be via Mexico. Nearshoring is expected to be a long and sustained race that could help build new ecosystems in Mexico’s existing manufacturing hubs.

As Mexico’s GDP and manufacturing grow, so too should corporate profits, especially in the financials, industrials and consumer sectors. In fact, during periods of above-average GDP growth, Mexican equities have tended to outperform in terms of valuation, profitability and operating performance. 

The nearshoring trend has already driven a rerating of Mexican stocks, and strategists see further upside for domestic companies in the next five years as the second wave of nearshoring growth gathers momentum.