Why Mexican Investors Should Look North

When it comes to wealth preservation and growth, investors must constantly ask themselves a simple question: Am I truly accounting for the risks embedded in the markets I am invested in?

Investment decisions are rarely straightforward. They require balancing risk, opportunity, and time horizons while avoiding the temptation to follow prevailing narratives. For Mexican investors today, the balance of evidence points to a more conservative conclusion: while Mexico continues to offer opportunities, structural headwinds suggest that diversification abroad, particularly in US assets, deserves renewed attention.

This is not a call to abandon the domestic market. Rather, it is an acknowledgment that certain fiscal and economic trends in Mexico may erode real returns, while conditions in the United States, despite their own complexities, appear relatively more stable.

The Chart That Changed My Thinking

I recently came across one of my favorite charts in the Federal Reserve’s FRED database: the real velocity of money. At first glance, it may seem like just another technical indicator. But for me, it was striking. Although we remain below pre-pandemic levels, this is the first meaningful pickup in years.

Why does that matter?

Velocity of money measures how quickly money circulates through the economy. In simple terms, it looks at how often a dollar changes hands. If money sits idle, velocity is low. If people and businesses are spending, investing, and transacting, velocity rises.

What makes the current trend particularly noteworthy is the context. We are seeing velocity pick up at the same time that both money supply (M2) and inflation are decreasing. Historically, higher velocity has often coincided with rising inflation. But today, the opposite is happening: money is moving faster, while prices remain relatively stable and liquidity is not expanding.

To me, that combination signals an improvement in the quality of economic activity. In other words, money is circulating in ways that are productive, not simply inflationary. It suggests that the US economy is absorbing flows more efficiently, a sign of resilience after years of distortion.

This is not about declaring the US economy perfect or without risk. It is about recognizing a healthier underlying dynamic compared to what we see in Mexico, where inflationary pressures and fiscal headwinds continue to weigh on real returns.

If you look beyond the headlines about tariffs and political battles, the US economic data tells an underappreciated story. For years after the 2008 financial crisis, money velocity declined relentlessly, reflecting sluggish economic activity and risk aversion. Then came the pandemic, when massive liquidity injections distorted money supply metrics and suppressed velocity even further.

But since 2022, the trend has reversed. Money velocity has been steadily climbing. At the same time, inflation, which spiked during the post-pandemic reopening, has moderated and stabilized, while M2 growth has flattened.

This combination is unusual. Typically, higher money velocity would fan inflation. Yet, in today’s US economy, velocity is rising while inflation remains contained. That suggests something powerful: the US system is absorbing money circulation in a healthy, productive way, without overheating.

It is a signal of economic normalization — even strength. And it challenges the doom narratives that tariffs or political uncertainty will automatically derail US fundamentals.

Meanwhile in Mexico: Higher Taxes, Weaker Growth

Contrast this with Mexico.

The government has already increased the ISR (Impuesto Sobre la Renta) on debt instruments, and for 2026 we can look at an even higher rate: 0.9%. For investors relying on fixed income, this is more than just a tax adjustment. It represents a structural erosion of real returns.

Why? Because Mexico simultaneously struggles with sticky inflation and a weakened growth outlook. A tax hike on debt income in a low-growth, inflation-prone environment effectively punishes savers. Even if you capture a nominal yield, your after-tax, after-inflation return is often negligible — or negative.

This is further compounded by risk premium. Mexico’s sovereign and corporate borrowers pay a higher spread due to perceived political and fiscal risks. That means yields must rise just to compensate for uncertainty, but higher yields don’t equal higher real returns if taxation and inflation eat away at the base.

For local investors, the math is unforgiving.

The Mirage of “Staying Local”

Some critics argue that investing abroad exposes Mexicans to unnecessary risks: currency volatility, unfamiliar regulations, or the political climate in the United States.

But when framed against Mexico’s domestic trajectory, this argument quickly loses weight.

Currency risk? The peso has been volatile, often driven by political narratives rather than fundamentals. Exposure to dollar-denominated assets can act as a natural hedge against this very risk.

Regulatory complexity? US markets, while sophisticated, are also among the most transparent and rule-bound in the world. Compare this to Mexico, where sudden policy shifts — from energy reforms to tax changes — can rewrite the investment landscape overnight.

Political climate in the United States? While noisy, the US has centuries of institutional resilience. Mexico’s younger institutions remain more vulnerable to sudden shocks.

The supposed “safety” of staying in Mexico is, in reality, a mirage.

Now, it is important to stress: investing abroad is not an abandonment of Mexico. It is a recognition of how wealth is preserved across generations. True wealth builders — families, entrepreneurs, institutional investors — understand that concentration is the enemy of resilience.

Mexico will always be home, and opportunities here will continue to exist. But home bias should not blind us to mathematics. When after-tax, after-inflation real returns are systematically higher in the United States than in Mexico, capital will naturally migrate. The smart move is to be early, not late.

A Tale of Two Paths

Let us illustrate the contrast.

Investor A holds Mexican government bonds yielding 10%. After 2%–3% inflation, rising ISR, and country risk premium, their real net return may fall below 3%.

Investor B diversifies into US real estate or equities. Even in conservative scenarios, they can capture 5%–7% annualized returns, dollar-denominated, with lower risk of policy shocks.

Over a decade, the difference is not marginal. It is transformative.

Why the Velocity of Money Matters for Mexican Investors

Let’s return to the US chart.

The post-pandemic uptick in money velocity is not just an academic curiosity. It signals that the US economy is functioning with renewed vigor. Money is moving. People are spending, businesses are investing, and financial flows are circulating at healthier speeds.

Combine this with:

• A contained inflation environment (2%–3%)
• A stabilized M2 money supply
• A resilient labor market

And you get an economy where capital can still earn real returns without the corrosive effect of inflation.

For Mexican investors, this is a beacon. While Mexico wrestles with structural challenges, the United States provides a platform where your capital can actually grow.

A Call to Act

The data tells a clear story. In the United States, we see resilience: money velocity rising, inflation stabilizing, M2 normalizing. In Mexico, we see headwinds: higher taxes, weaker growth, persistent inflation, higher risk.

The contrarian move is to look north, not with fear but with strategy. Diversification into US assets is not abandoning Mexico. It is protecting and multiplying wealth in a way that ensures the resources built here can endure and grow.

Those who act now will position themselves ahead of the curve. Those who wait may discover too late that loyalty to a flawed domestic environment is not rewarded in capital markets.

In the end, the question is simple: Do you want your wealth tied to a system where velocity signals strength, or one where rising taxes and inflation erode your base?

The answer, for those willing to see clearly, points north.