Mexico is one of the largest emerging markets. Due to its close proximity to the US, the Mexico plays a critical role in the US economy and politics than other markets like Russia, India, China, etc.
The Manufacturing industry is the largest industry in Mexico. Some of the other facts about the Mexican economy is shown in the follow graphic:
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Source: NAFTA Works (Mexico Ministry of the Economy)
Valuation is important when investing in equities. Investing in stocks when valuations are cheap not only offers some downside protection but also juices the return when markets soar.
The table below shows the valuations of major equity markets today based on four metrics:
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Source: How low rates affect stockmarket returns, Schroders
The lower the P/E ratio the better. The sameee goes ffor CAPE or cyclically-adjusted price-to-earnings ratio and price/book ratio.
Higher Dividend yields are better than lower yields.
Based on the CAPE ratio, the US market is expensive. The value of 79 shows that the market has been cheaper 79% of the time than it is today.
The US has the lowest dividend yield at 2.1% while the UK has the highest yield. The US yield is lower than even emerging markets yield.
The US and Mexican economies are highly integrated with billions of dollars of goods traded between the countries. In addition, millions of US jobs depend on trade with Mexico.
The graphic below shows the trade values and number of US jobs by state in relation to trade with Mexico:
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Source: NAFTA Works (Mexico Ministry of the Economy)
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