The IPC hit an all-time high of 68,279 on January 21. The MBono 10Y yield has fallen to roughly 9.5%, down from above 10% six months ago. The peso ended 2025 trading around 18.0 per dollar, stronger than most analysts projected at the start of the year. And Banxico closed 2025 with its twelfth consecutive rate cut, bringing the policy rate to 7.0%.
On paper, the setup entering 2026 looks favorable. The question is whether the easy part of the trade is over. We think it is. But that does not mean there is nothing to do. It means the trades that work from here will be more specific, more structural, and less correlated with the broad index.
Here are the five themes we are positioning around for the next twelve months.
1. The Banxico pause trade: short-duration rates over long bonds
Banxico’s December statement introduced a subtle but important language shift. The board said it would “evaluate the timing for additional reference rate adjustments,” replacing the earlier, more explicit forward guidance that pointed toward continued cuts. Economists at Banamex and Banorte expect a pause at the February 5 meeting, and possibly through March, as the board assesses the impact of higher IEPS taxes and the January minimum wage increase on inflation.
Headline inflation at 3.8% in late 2025 is within the variability range but not at target. Core inflation at 4.4% remains stubbornly above 4%, driven by services. The easing cycle is not over: we expect Banxico to cut at least two more times in 2026, likely resuming in Q2 once the January price shock washes through the data. But the pace will be slower than in 2025, and the terminal rate is probably closer to 6.0-6.5% than the 5.5% some market participants had priced by late 2025.
The trade that follows from this view is short-duration Mexican government paper over long-dated MBonos. CETES at the front end still offer attractive nominal yields above 9.5%, and they benefit if the pause extends longer than expected. Long-dated MBonos, by contrast, have already rallied significantly on easing expectations and are exposed to upside inflation surprises that could steepen the curve. If core inflation proves sticky through Q1, the 10Y could sell off even as the front end holds steady.
For equity investors who do not trade rates directly, the implication is this: sectors that benefit from rate cuts (consumer credit, housing, rate-sensitive financials) may see a temporary stall in the re-rating that carried them through 2025. The second half of 2026 is where the next leg of monetary easing becomes more visible.
2. The USMCA hedge: airport concessions as optionality
The formal USMCA mid-term review in July 2026 is the single highest-impact binary event on the Mexican macro calendar. The range of outcomes spans from a routine ratification that clears the overhang for the rest of the decade, to a protracted renegotiation that introduces rolling uncertainty over specific provisions, particularly automotive rules of origin, labor standards, and energy market access.
Our base case is a contentious but ultimately manageable review. Mexico is now the United States’ largest single trade partner, accounting for 15.5% of total US trade flows in the first ten months of 2025, ahead of Canada at 12.9%. This structural interdependence gives Mexico genuine negotiating leverage that is often underweighted in scenarios that assume Washington holds all the cards.
The asymmetric play on this theme is the airport concession operators: GAPB, ASUR, and OMA. Here is why: a positive USMCA outcome directly accelerates cross-border business travel and tourism, which flows through passenger traffic and into concession revenue. A negative outcome would hurt the broader market but would affect airports less than manufacturing-exposed names (auto parts, industrial FIBRAs with border exposure) because air travel is less directly tied to goods trade provisions.
The optionality is in the valuation. Airport stocks derated through mid-2025 on a combination of regulatory noise around the maximum tariff framework and general trade uncertainty. If USMCA passes cleanly, these names re-rate rapidly. If it does not, they underperform less than the market because their revenue base (passenger fees, commercial revenue) is more resilient than industrial exports. That is not a hedge in the traditional sense: it is an exposure that has an asymmetric payoff profile around the single most important event of the year.
3. The NIM expansion trade: Gentera and financial inclusion beneficiaries
We wrote about Gentera last week, and the thesis deserves a broader frame. Banxico’s easing cycle creates a NIM tailwind for any financial institution whose lending rates are structurally sticky while its funding costs decline with the reference rate. In Mexico, this describes the microfinance and consumer credit segment better than it describes the large commercial banks.
Banorte, Santander Mexico, and the other large banks operate in competitive lending markets where rate cuts get partially passed through to borrowers. Microfinance lenders like Gentera (through Banco Compartamos) and consumer credit operators like ConCredito price to credit risk and product type, not to the interbank rate. The spread between their asset yields and their funding costs widens mechanically with every Banxico cut.
Gentera reported a NIM of 40.9% in Q2 2025, above the 39.8% FY 2024 figure and above management guidance. The insurance business now contributes 11% of total income, adding a capital-light fee stream. ROE exceeded 23% in Q3 2025, the highest in a decade.
The broader theme is that Mexico’s financial inclusion story is underappreciated in international equity coverage. There are 35 million adults in Mexico with limited or no access to formal banking services. Every one of them is a potential borrower, saver, or insurance policyholder for an institution with the distribution infrastructure to reach them. Gentera has 6.5 million clients and a nationwide presence through more than 800 service points. The unit economics of adding a borrower to an existing group lending circle are extraordinarily favorable.
This is not a 2026-specific trade. It is a structural position in a sector where the competitive moat (physical distribution, community trust, group lending methodology) is nearly impossible for digital-only fintechs to replicate. The rate cycle just makes the entry point more attractive.
4. The consumption recovery: WALMEX as the domestic demand barometer
Mexico’s GDP contracted 0.2% in Q3 2025, prompting Banxico to halve its full-year 2025 growth forecast to 0.3%. The economic weakness is real, driven by softer investment, fiscal tightening, and trade uncertainty. But within that weakness, household consumption has shown more resilience than headline GDP suggests, supported by strong formal employment growth (IMSS data showed consistent job creation through H2 2025), real wage gains above inflation, and remittance flows that remain near record levels.
We think the consumption picture improves in 2026, and WALMEX is the cleanest expression of that view in Mexican public equities.
Walmart de Mexico operates 3,800+ stores across Mexico and Central America. Its same-store-sales growth has consistently outpaced the industry, driven by format diversification (Bodega Aurrera for value, Walmart Supercenter for middle-income, Sam’s Club for bulk), an expanding e-commerce platform, and a logistics infrastructure that competitors struggle to match. When Mexican consumers spend, WALMEX captures a disproportionate share of that spending.
The setup for 2026 is a modest but broadening consumption recovery in Mexico, amplified by two tailwinds: a minimum wage increase that supports purchasing power at the base of the income pyramid (Bodega Aurrera’s core customer), and rate cuts that eventually ease credit conditions for durable goods purchases. WALMEX is not a high-growth story. It is a compounding machine that generates mid-to-high single-digit same-store-sales growth, reinvests in store base and logistics, and returns cash through dividends. In a year where macro visibility is low and USMCA uncertainty clouds the outlook for export-oriented names, domestic consumption champions like WALMEX offer relative safety with a quality premium that we think is justified.
The risk is that the consumption recovery disappoints. If GDP growth remains below 1% through H1 2026, even WALMEX’s competitive advantages cannot fully offset a weak spending environment. But WALMEX has demonstrated an ability to gain market share in downturns, which limits the downside relative to the market.
5. The peso carry unwind: what to watch for the trade that has worked too well
The MXN carry trade has been one of the most profitable trades in emerging markets over the past 18 months. With Banxico’s policy rate at 7.0% and the Fed at 3.75%, the yield differential still exceeds 300 basis points, making MXN-denominated assets attractive for carry-seeking capital. The peso’s stability around 18.0 per dollar through late 2025 rewarded this positioning handsomely.
We are not calling for a peso collapse. The structural case for MXN remains intact: the current account deficit is manageable, foreign reserves are adequate, remittance flows provide a consistent dollar supply, and the nearshoring narrative continues to attract FDI even if actual disbursements have moderated from peak expectations. Mexico’s fiscal position, while deteriorating at the margin (Pemex contingent liabilities remain the largest off-balance-sheet risk), is not at crisis levels.
But we are flagging this as the crowded trade that deserves the closest monitoring in 2026. Three triggers could force a rapid unwind:
Trigger one: a USMCA breakdown. If the July review produces a genuinely adversarial outcome, the peso would reprice immediately as the market reassesses Mexico’s structural position in North American supply chains. A move from 18 to 20+ per dollar is not inconceivable in that scenario, and it would happen faster than most hedging strategies can adjust.
Trigger two: a Banxico policy mistake. If the board resumes cutting too aggressively before core inflation is convincingly below 4%, the yield differential that underpins the carry trade narrows at exactly the moment when inflation expectations are rising. That combination, lower rates plus higher inflation, is toxic for any currency.
Trigger three: a global risk-off event. MXN correlates with broad EM sentiment during periods of stress. A US recession scare, a major geopolitical escalation, or a liquidity crunch in global markets would trigger MXN selling regardless of Mexico’s domestic fundamentals. The carry trade is profitable precisely because it compensates for this tail risk.
For equity investors with MXN-denominated portfolios, the practical implication is to be aware of the currency overlay. The stocks may perform, but if the peso gives back 10% against the dollar, the total return in USD terms evaporates. Monitoring the FX reserve data (published monthly by Banxico), the non-resident positioning in CETES and MBonos (published bi-weekly), and the options market implied volatility for USD/MXN are the three data points that would signal whether the carry unwind is beginning.
Five trades for Mexico in 2026, at a glance
Source: The Investment Case analysis, as of January 24, 2026. Not investment advice.
Putting it together
These five themes are not equally weighted in conviction. The NIM expansion trade (Theme 3) and the consumption recovery trade (Theme 4) are our highest-conviction positions because they depend on domestic dynamics that are more predictable than the geopolitical variables driving Themes 2 and 5. The Banxico pause trade (Theme 1) is the most time-sensitive: it works for Q1-Q2 2026 and then needs to be reassessed.
The common thread across all five is that 2026 will reward selectivity over beta. The IPC’s all-time high is a reflection of legitimate progress: a functioning central bank, resilient consumer spending, and a nearshoring narrative that continues to attract capital. But from here, the index-level upside is more modest than it was a year ago, and the risks (USMCA, inflation persistence, peso positioning) are more defined.
We would rather own Gentera at 23%+ ROE with NIM expansion than the IPC at an all-time high. We would rather hold WALMEX through a consumption recovery than chase the broader market. And we would rather position in airport concessions as USMCA optionality than bet on the headline index clearing 70,000 and holding.
The easy money in Mexico was made in 2025. The smart money in 2026 requires a thesis.