Mexican stocks are charging ahead of their U.S. counterparts this year, setting the stage for their strongest outperformance versus the S&P 500 since 2005, defying speculations that a Donald Trump administration would deal a blow to Mexican assets.

Through May 8, the iShares MSCI Mexico ETF —a key vehicle for U.S. investors to access Mexican equities—has surged 26%, while the S&P 500, tracked by the SPDR S&P 500 ETF Trust ( SPY ) , has dropped 4.5%.

That's a staggering 30.5 percentage point lead in less than five months, rivaling the 37% annual outperformance seen in 2005—but at a much faster pace.

Mexican vs. US Stocks: YTD Performance (Through May 8, 2025)

Peso Recovery And Economic Resilience Fuel the Rally

The Mexican peso has appreciated 6.5% against the U.S. dollar so far this year, clawing back losses after a 23% decline in 2024.

Meanwhile, the Mexican economy narrowly avoided a technical recession in the first quarter, while the U.S. economy contracted.

"Despite heightened domestic and external uncertainty, Mexico (barely) escaped entering a technical recession in 1Q25," said Alberto Ramos, economist at Goldman Sachs.

According to Ramos, strong trade flows into the U.S. ahead of anticipated import tariff changes supported activity in early 2025. However, he also flagged warning signs, with weakening business confidence and a downturn in manufacturing sentiment.

April's manufacturing PMIs showed clear contraction, particularly in new domestic and export orders.

Banxico In Easing Mode As Growth Risks Rise

Mexico's central bank has responded to the shifting macroeconomic landscape with monetary easing. Since July 2024, Banxico has cut rates by 200 basis points, bringing the policy rate down to 9%.

Since January, the pace of cuts has accelerated to 50 basis points per meeting. This comes amid rising global uncertainty, especially around the potential for renewed U.S. trade tensions under the Trump administration.

Analysts expect another 50-basis-point cut on May 9, assuming inflation trends continue to improve, suggesting further easing may be in the pipeline.

Top-Performing Mexican Stocks In 2025

Several Mexican equities have delivered stellar returns this year, with four stocks in the EWW ETF already posting gains above 50%:

A key contributor has also been Grupo Financiero Banorte, up 35% year to date and currently the largest holding in the EWW ETF, with an 11% weight.

Market breadth has been notably positive, with just 6 of the 47 EWW constituents posting losses this year through May 8.

Read Next:

Powell Flags Sharp Tariff Shock, Elevated Uncertainty: Fed Sticks To ‘Wait-And-See’ Mode