Cinco de Mayo, meaning the fifth of May in Spanish, is a day of gratification for all Mexicans. The day honors the Mexican army's incredible victory over the French militia in the Battle of Puebla in 1862. Though the victory was short-lived as the French finally took over, the day became commemorative of Mexican ethnicity and is widely celebrated even in the United States.

So, let’s play a mock war between Mexico and France. This mock fight will give investors a fair idea of the present stock market scenario of the two countries.

iShares MSCI Mexico Capped ETF (EWW Quick QuoteEWW - Free Report)  – Up 19.3% YTD (as of May 3, 2025)

The Mexican economy can be represented by the pure-play ETF EWW. The Mexican GDP grew by 0.2% sequentially in the first quarter of 2025, rebounding from a 0.6% contraction in the previous quarter and beating market expectations of no growth.

Although the modest quarter-over-quarter growth kept Mexico from entering a technical recession, it fails to alter the broader narrative of economic vulnerability significantly. The outlook remains uncertain amid tight financial conditions and U.S. trade war risks.

On the currency front, the Mexican peso just recorded its biggest monthly advance since 2021, thanks to a reprieve in President Donald Trump’s tariff plan and a decline in the U.S. dollar. Note that Invesco DB US Dollar Index Bullish Fund (UUP Quick QuoteUUP - Free Report) lost 1.5% over the past month (as of May 3, 2025).

The peso strengthened 4.4% against the greenback in April, outperforming all its main regional peers after Mexico was one of the few countries to be spared Trump’s so-called reciprocal tariffs. But this peso rally is likely to be short-lived as the greenback staring to show strength amid easing global trade tensions. The UUP ETF gained 0.5% last week. The move will go against the Mexican peso.

Overall, growth in Latin America (Latam) is forecast to remain subdued at 1.4% in 2025 and 2.0% in 2026 after a tepid 1.7% in 2024, per KPMG. Given its heavy reliance on U.S. demand and high effective tariff rate, Mexico—one of the region’s most exposed economies—could fall into recession.

The fund EWW currently has a Zacks Rank #5 (Strong Sell).

iShares MSCI France ETF (EWQ Quick QuoteEWQ - Free Report) ) – Up 17.8% YTD (as of May 3, 2025)

On the other hand, the French economy grew by 0.1% sequentially in Q1 of 2025, reversing a 0.1% contraction in Q4 but falling short of market expectations for a 0.2% increase. Subdued household consumption and fixed investment weighed on the growth. A decline in goods purchases was offset by higher spending on services.

President Trump's announcement of a three-month-tariff-pause for most countries came as a short-term relief. But French officials are viewing his trade policy as unpredictable.Low consumption and higher savings might lead the French economy close to stagnation for the rest of the year.

Still, the lure of French investments is not absolutely dull. On a yearly basis, the economy advanced 0.8%, in line with an upwardly revised Q4 figure and slightly surpassing consensus of 0.7%.

The European Central Bank (ECB) has been accommodative. The ECB’s generous rate cut momentum has proved to be a game-changer for the European stock market this year. Most Euro zone countries’ stock markets have surged in 2025 and beat their U.S. counterparts.

In the tariff-laden past month, iShares MSCI Eurozone ETF (EZU Quick QuoteEZU - Free Report) (up 7.5%) beat the S&P 500 (up 5.4%). The Fance ETF EWQ also surpassed the gains of the S&P 500, having risen by 6%.

EWQ has a Zacks ETF Rank #3 (Hold).

The Winner

Like the actual war, the Mexico ETF has emerged as the winner this year.  But this beat was by a margin. However, over the long term, the battle might present us a different victor like the actual war, given Mexican economy’s more vulnerable nature.