By Michelle Davis / Bloomberg
The seven-year bull run in Mexican stocks might be coming to an end.
Strategists and investors are tempering their expectations as corporate profits slide, economic growth slows and the U.S. presidential election rattles investors.
UBS expects a 10 percent drop in the IPC index by the end of the year. BTG Pactual cut its recommendation on Mexican stocks to underweight last week. Barclays says valuations are bound to fall.
This month, Mexico’s biggest stock ETF has seen the largest withdrawals in two years.
The increasingly bearish sentiment is closely tied to a rout in the peso that has made it the worst performing major currency amid prospects that Donald Trump will win the U.S. presidential election and make good on pledges to renegotiate trade accords.
While the peso has recovered from record lows, international investors have been hit hard in recent weeks. The IPC index has fallen 3.4 percent in dollar terms since the Republican convention, compared with a 5 percent gain in the MSCI Emerging Markets stock index.
“Things have changed and it makes it very difficult to predict where we might end up by year-end,” said Benjamin Theurer, an equity analyst at Barclays in Mexico City. “At the beginning of the year, I wasn’t considering Trump would actually make it to be a nominee. It’s going to be volatile.”