February brought volatility to the markets caused mainly by global trade uncertainty. During most of the month, the downward trend for stocks continued and a recovery at the close was not enough to reverse the negative returns of the period. Defensive strategies such as value companies were favored over growth companies, with the technology sector index (Nasdaq) standing out as a loser, ending with a negative return of 3.97%; the latter impacted by the poor performance of the Magnificent Seven (Apple, Microsoft, Amazon, Nvidia, Tesla, Google and Meta) which were down an average of ~6% in the period.

On the other hand, the main fixed income indices benefited from consumption and employment data that showed a certain slowdown in the U.S. economy, leading the bond market to recalibrate the number of expected rate cuts (from 1 to 3) by the Federal Reserve for the year 2025.

With respect to economic issues, the focal point remains the tariffs announced by Trump and his team on February 1. These tariffs set a rate of 25% for Mexico and Canada, and 10% for China. Notwithstanding the above, the US government has decided to keep imports of products included in the TMEC exempt from such 25%, which represent around 50% for Mexico. At the moment, the tariffs for the rest of the products not included in the TMEC have been postponed until April 2. We believe that the U.S. President is using these threats as part of a negotiating strategy rather than as a trade measure, which could be less damaging, provided that negotiations move forward effectively.

Finally, in the local market, the Mexican stock market (IPC) achieved a yield of 2.18% during the period, bringing its year-to-date yield to 5.68%. The exchange rate remained relatively stable, although with high intraday volatility. Expectations for Mexico's GDP growth have declined as a result of this uncertainty on the trade front, given that the Mexican economy is highly dependent on exports to the United States.