The S&P 500 Index is off to a great start so far in 2023 – up 4% as of yesterday's close. It's a little too early to get excited. But this is still an encouraging sign for the future.
As impressive as these gains are, U.S. stocks aren't the only ones rallying to start the year. In fact, there's one country in particular that's significantly outperforming...
Headline No. 1:
Mexican stocks have rallied to their best level since 2017.
McCall's Call: Mexican stocks have been on a tear here in 2023. The iShares MSCI Mexico Fund (EWW) – which tracks the broad-based performance of Mexican stocks – is up 14.4% as of yesterday’s close.
A couple factors are working in favor of Mexican stocks right now...
First, there's the strength in the Mexican peso – which is now at its highest level versus the U.S. dollar in more than two years. The greenback topped out in September after dominating much of 2022, and it has been in a freefall since.
This has helped foreign currencies – especially those of developing nations such as Mexico.
Second, Mexico and other Latin American countries are cheap relative to the United States. As you can see in the chart below, the forward price-to-earnings (P/E) ratio for the iShares MSCI Mexico Fund fell to 11.5 last week.
Since the 2008 and 2009 financial crash, the only time its valuation has been lower was during the COVID-19 shutdown and last year.
The third catalyst boosting Mexican stocks is the deglobalization that has been taking place since COVID-19. More countries are onshoring their supply chain after COVID-19 disruptions highlighted the potential problems. And Mexico's proximity to the U.S. makes it the perfect trade partner.
I expect to see more production facilities move south of the border to ensure a more solid supply chain. This could also even lower input costs at the same time.
From an investing standpoint, there are several Mexican exchange-traded funds that U.S. investors can access easily on U.S. exchanges. There are also some Mexican companies that trade in the U.S. as American depositary receipts.
The breakout we're seeing right now in Mexican stocks is likely the start of a long-term trend during the Roaring 2020s. And you can bet my team and I are keeping an eye on the space.
Headline No. 2:
Electric-vehicle ("EV") sales jumped 68% last year.
McCall's Call: The EV industry put up some huge numbers in 2022...
Fully EV sales surged 68% during the year to 7.8 million units. China led the way – with 5.02 million EVs sold. Europe and the U.S. grew their sales 22% and 75%, respectively, to make up the second- and third-largest EV markets.
Altogether, EVs made up 10% of global auto sales in 2022 – marking a record high for EV market share. But regular Daily Insight readers know this megatrend still has a long runway for growth. It's a near certainty that there will be more EVs on the road at the end of the Roaring 2020s than there are today.
Plus, EVs still only make up less than 20% of total sales in each of the three largest auto markets in the world – China, Europe, and the United States.
But adoption is picking up steam...
EVs are expected to make up 25% of all Chinese car sales in 2023 (up from 19% in 2022). And next year, EVs will make up one out of every three cars sold in that country. The U.S. and European markets will follow suit, ramping up EV sales by 55% and 45%, respectively, this year.
So it won't be long before we see EV sales cross that global 20% market share threshold.
Huge auto companies – like Tesla (TSLA), Volkswagen (VWAGY), Ford Motor (F), and General Motors (GM) – are investing heavily in this space, too, with aggressive goals to pivot from traditional, gasoline-powered cars to EVs.
Volkswagen alone predicts EVs will account for 25% of its total vehicle sales and 50% of all new vehicles sold in 2030. And if other "traditional" auto companies come even close to Volkswagen's plan this decade, EV sales will make up far more than 20% of global auto sales.
Clearly, we're nowhere near the end of this megatrend.
Yes, EVs just hit a huge milestone by reaching a 10% market share in the global auto market. But with the coming investment in EV technology, this is only the first step in the market's rapid growth throughout the Roaring 2020s.
That makes now the time to get in – and it's why my McCall Report subscribers have already gotten in position with the stocks making up our Transportation 2.0 portfolio. In fact, we just locked in a 96% profit on half of one of our positions... and now we're playing with house money on the remaining half.
This is only a small example of the kind of massive gains that the EV market and future of transportation megatrend will generate in the years ahead. So if you haven't already, I urge you to consider staking your claim in the industry now.
My team and I are keeping our finger on the pulse of the market – and our watch list is filling up fast. It's only a matter of time before the next big opportunity issues a buy signal.
Here's to the future,
Editor, Daily Insight
January 18, 2023
Did You Miss My Latest Podcast?
We're only halfway through January and already stocks are on pace for a great year. It's still very early... But optimism is starting to come back into the market. And investors are looking to add some defensive stocks to their portfolios – literally.
So on this episode of Making Money With Matt McCall, I dive into the aerospace and defense sector. This group of stocks outperformed the market last year as it acted like a true defensive play during the bear market.
I examine the leaders in the industry – the companies that are best positioned to take advantage of all the global tensions that unfortunately are at work in our world. I talk about some of the big names, such as Raytheon Technologies (RTX)... as well as the smaller ones you may not have heard about. So get your pen and pad ready. Some of these should be added to your watch list immediately.