Daily Brief Macro: Mexico faces a deficit – and Donald Trump and more

• President Claudia Sheinbaum took office in October, inheriting a delicate economic situation from her popular predecessor Andres Manuel Lopez Obrador.
• Many lower income people in Mexico are benefiting from higher wages and government social programs, but others, particularly middle and higher income earners, feel stagnant economic growth and uncertainty due to US tariff threats.
• The relationship between Mexico and the US, along with Sheinbaum’s plans and the ability to attract outside investment, will be key factors in Mexico’s economic growth under her leadership.

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• Our differentiated business cycle analysis approach to investment strategy and asset allocation is grounded in the real world and covers 11 economies.
• Understanding where a country is in the business cycle is key to investing to generate alpha while avoiding the pitfalls. 
• Investing through the business cycle works. 69.8% of the 43 global investment calls made last year made money. 

• The ECB cut its deposit rate by 25bp for the fifth time as growth remains weak, with GDP stagnating and inflation still expected to ease towards target-consistent levels.
• It believes monetary policy is tight despite 125bp of easing, leaving room for another cut in March. Updated staff estimates of the neutral rate on 7 February are critical.
• However, President Lagarde incredulously rejected calls for stimulative policy. Low unemployment suggests output isn’t below potential, making stimulus inappropriate.

• December’s personal income and spending report will be largely old news, with Q4 totals seen with the GDP report on January 30.
• Our pre-GDP forecasts for a 0.2% rise in core PCE prices and a 0.4% rise in personal income still look valid.
• December personal income is unlikely to rise so sharply, which suggests upward revisions in October and November. 

• CEMEX (Outperform): today the company concludes the sale of its Dominican Republic assets announced previously on August 2024.
• The net proceeds are close to US$950 M, which is aligned with the company’s strategy to improve its asset portfolio.
• Please note that the Dominican Republic asset sales is part of a ~US$2.2 Bn divestments program identified by CEMEX (CX).

• The Federal Reserve held the federal funds rate at 4.25%-4.50%, pausing after prior cuts in response to stable labour market conditions and still-elevated inflation.
• Inflation has declined significantly but remains above target, with core PCE at 2.8%, justifying a cautious approach to further easing.
• Future rate moves will depend on inflation and labour market trends, with the Fed retaining flexibility. We still expect a final cut in March.

• Mark has 15 years of experience delivering new technology products in a variety of companies and holds a PhD in Computer Science from UCL University of London
• He is the author of the book Taming LLMs and the creator of Podcastify AI
• Mark recapped recent events in the markets, discussed taming LLMs and creating robotic podcasts, and highlighted the success of Bitcoin ETFs

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• After the November rebound, December’s ANTAD SSS closed at 1.2%, one of the lowest figures in the year.
• Meanwhile, total store sales grew by 4.0% YoY. Both figures were also below YTD performance.
• On a 2-year comp basis, performance was also weak, with SSS growing 6.5%, also one of the lowest of the year. For the full year, SSS closed at 4.2%, the lowest post pandemic.