Because American politics have descended into a nightmarish farce, Wall Street banks have begun the sad task of strategizing how to prepare for the possibility that immigrant-maligning jack-o'-lantern Donald Trump might win the presidency. Their advice so far? Bet against Mexico, or at least its currency. According to Bloomberg, both Barclays and Citigroup are arguing that investors should short the peso as a hedge against Trump in the White House.
The thinking here is that, between the candidate's plans to stop immigrants from sending remittances south of the border, to deport millions of undocumented workers (who again, send a good deal of money home), and to possibly toy with NAFTA, Trump is bound to do something destructive to Mexico's economy and therefore to the value of its money. “The only thing you are certain of is that if Trump wins, the Mexican peso will be weaker,” Citigroup strategist Dirk Willer told Bloomberg.
The depressing thing for Mexico—well, the especially depressing thing—is that these kinds of predictions tend to turn into self-fulfilling prophecies. If lots of traders conclude that shorting the peso is the best way to gird themselves for the age of Trump, then lots of traders are going to short the peso should it look as if the man might triumph in November. Of course, if lots of people short the peso, that itself will drive down its value, causing more investors to pull their cash from the country, potentially causing some turbulence for Mexico's financial system and its real economy.
The Mexican government, meanwhile, may already be taking precautions. Per Bloomberg:
There are signs that Mexican authorities may be bracing for the Trump effect as well. Last month, the government unexpectedly boosted its credit line with the International Monetary Fund to $88 billion. While the Finance Ministry has said the decision was tied to external risks such as a slowdown in the world economy, analysts at Grupo Financiero Banorte SAB speculated the move was in part designed to withstand the outflows that could follow a Trump victory.
Anyway, banks think you should short Mexico to prepare for Trump. Which means people will probably short Mexico. Poor Mexico.