Today, I have a Mexican stock with a great-looking chart to recommend. But first, I want to point out a few news-making events that may or may not affect global stock markets ...
Newspaper headlines (remember them?) continue to focus on the sparks, steam and shouting in Washington, D.C., but the news that will move the markets in the longer term is showing up on the inner pages. And much of it has to do with negotiations, not politics.
In Brussels, Great Britain and the European Union are negotiating the terms of Britain’s withdrawal, which is an enormously complicated process. The EU guaranteed the free movement of people and goods throughout what used to be called the Common Market. The Market leveled trade barriers and set standards for measurement, quality and environmental impact and set up the structures for enforcing regulations and appealing violations.
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Stock markets reacted negatively to the original Brexit vote, but are taking the negotiations in stride. No news is good news for equity investors, but once the actual negotiated terms of withdrawal are announced (or start to leak, which is more likely), markets will add them to one side or the other of its weighing scales and adjust accordingly. (It reminds me of the Benjamin Graham remark that “in the short run, the market is a voting machine but in the long run, it is a weighing machine.”)
The other negotiations making news on financial websites are the ones just starting in Washington, D.C., to reconsider the terms of the North American Free Trade Association (NAFTA), the 1994 agreement that united Canada, the U.S. and Mexico into an EU-style free-trade area. The shortcomings of NAFTA were a big campaign issue for candidate Donald Trump, and the U.S. is expected to push for a major overhaul of the accord.
There was significant downward pressure on the iShares MSCI Mexico Capped ETF (EWW) last November after Trump’s election, but the ETF has made up much of its lost ground. Here’s a daily chart showing the ETF’s performance (in green) over the past year versus the progress of the S&P 500.
The bottom line for Mexican stocks like Grupo Aeroportuario Del Pacifico (PAC), which took a big hit in November 2016 but has stormed back in 2017, is that it’s better to watch the chart than the headlines. I had the stock in the portfolio of Cabot Global Stocks Explorer back in 2015 and sold at a nice profit when the stock stumbled late in the year.
PAC recovered from its November walloping after the U.S. election and has soared from its 70 correction low in January 2017 to over 110 in recent trading. The NAFTA negotiations may be having a small effect on PAC, which has been correcting since late July, but you’re still better off buying and handling this Mexican stock via its chart than via the headlines. Here’s a year-to-date chart to show PAC’s strength.
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