Geopolitics was certainly one of 2022’s greatest traits for markets, from the headline information of Russia’s invasion of Ukraine to investor panics concerning China’s zero-COVID coverage, the Chinese language Communist Celebration, and the rising U.S.-China Commerce conflict. With international logistics challenges additionally lingering from the pandemic’s darkest days, Mexico may very well be one nation to observe when investing in international commerce this yr by way of the Franklin FTSE Mexico ETF (FLMX).

Why look to a Mexico Etf now? Think about its potential to profit from the commerce conflict between China and the U.S., which entered a brand new and doubtlessly much more tense part with the brand new U.S. export restrictions on semiconductors in China. Former President Donald Trump had formalized a long-brewing rivalry between the 2 international locations along with his tariff impositions, however the semiconductor guidelines look extra like a direct shot at China’s skill to compete with core elements of the American economic system in tech.

Analysis from Financial institution of America exhibits that whereas the Chinese language share of U.S. imports of manufactured items has dipped, to 16.7%, Mexico’s share sits at 9.7% as of October – the very best level since 1997. Mexico has gained share in U.S. imports in areas like plastics and textiles, with its wages decrease than these in China and crucially, an extended and well-traveled border with the U.S.

That final level turns into much more essential provided that logistics challenges are nonetheless hanging round – 61% of logistics managers at main corporations and commerce organizations just like the Nationwide Retail Federation informed CNBC in a survey that their provide chains are nonetheless not working usually. Nearly a 3rd of those self same managers added that they anticipated their operations to function usually once more in or after 2025, or by no means.

Mexico’s shared land border with the U.S. has its justifiable share of issues, however its economic system could also be poised to profit from taking up an even bigger share of the U.S. import enterprise. That’s the place a Mexico ETF can profit from international commerce, with FLMX a candidate to observe.

The ETF expenses simply 19 foundation factors to trace the FTSE Mexico RIC Capped Index, which incorporates massive and mid-size corporations in Mexico however extra small-cap publicity than rival Mexico ETFs – in addition to a considerably cheaper charge. The technique has outperformed its ETF Database Class Common and Factset Phase Common over three months, returning 12.6% in that point.

International uncertainty appears to proceed this yr, with geopolitics returning to buyers’ minds in an enormous manner final yr. For these trying to navigate these challenges, a Mexico ETF like FLMX may very well be an possibility to contemplate because the U.S. market appears more and more to the South for enterprise.

For extra information, data, and evaluation, go to the Volatility Useful resource Channel.

VettaFi is an impartial writer and takes accountability for our edit workers, analysis, and postings. Franklin Templeton will not be affiliated with VettaFi and was not concerned in drafting this text. The opinions and forecasts expressed are solely these of VettaFi and will not really come to move. Info on this web site shouldn’t be used or construed as a suggestion to promote, a solicitation of a suggestion to purchase, or a advice for any product.