With news that Federal Reserve Chair Jerome Powell is perhaps looking at hastening the pace of additional rate hikes this year to tame inflation, the U.S. market is looking like an increasingly stressful environment in which to operate. That has investors looking abroad for their equities slices, but they need not look too far away with a Mexico ETF like the Franklin FTSE Mexico ETF (FLMX) set to benefit as U.S. industries look to take their business south.
Tesla (TSLA) for example just announced plans for a major gigafactory in northern Mexico, expected to spread across almost 4,200 acres, almost doubling the size of TSLA’s factory site in Texas. That move comes as Mexico is benefitting from surging demand for industrial space to feed Americans’ ravenous e-commerce spending.
Proximity to the U.S. has also been a notable boon for investing in Mexico, as supply chain managers still reel from the logistics challenges highlighted at the height of the global pandemic. Mattel Inc. (MAT) is another firm that expanded its presence in Mexico over the last three years, making its Monterrey plant into its largest global manufacturing site.
That foreign direct investment is just one factor that is contributing to a bright outlook for Mexico, according to a recent report from JP Morgan Chase, with resilient external demand and domestic consumption seen as powerful drivers of growth amid a broader look at Latin America. That may present an appealing opportunity for investors looking for a Mexico ETF like FLMX.
FLMX tracks the FTSE Mexico RIC Capped Index and charges 19 basis points for its performance, which has been strong YTD, outperforming its ETF Database category average and its FactSet segment average in that time. FLMX has returned 20.5% YTD compared to 6.5% and 13.8%, respectively. FLMX has also added $4.1 million over the last month in net inflows.
Investors have a lot on their plates right now in an overvalued U.S. market, and with international equities an exciting place to be according to Franklin Templeton, a Mexico ETF like FLMX could be just close enough to the U.S. to combine proximity to a massive market with resilient domestic performance.
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