Polls aren’t the only sign of who’s ahead — Donald Trump or Hillary Clinton — in the Presidential election race.
Given Trump’s harsh comments on Mexico and his hatred of the NAFTA trade deal, a railroad company is starting to track his fortunes.
Much like the Mexican peso, Kansas City Southern stock too is moving in correlation with Trump’s poll numbers and debate performance…in the opposite direction. When Wall Street thinks Trump is going to lose, the stock rises.
That’s because the railroad has about half of its business in Mexico and half in the United States. The company operates two huge railroads on each side of the border. About 25% of the loads KCS carries cross the border between the two nations.
Cars, like Ford’s, represents about 10% of railroad’s business
Transporting cars, such those made by Ford, represent nearly 10% of Kansas City Southern’s sales. Trump has specifically targeted Ford as a company on which he would impose tariffs.
“Any threat to NAFTA is a threat to KCS,” says Rich Paterson, an equity analyst at Loop Capital Markets, a firm in New York that first pointed out the correlation between Trump’s poll numbers and KCS stock performance.
After Monday’s debate, Kansas City Southern was the best performing railroad stock on Tuesday, gaining 1.6%. It was up a bit Wednesday and Thursday too.
“Clearly this is having an impact,” Paterson noted.
Conversely, after a Sept. 14 CNN/ORC poll and others showed Trump’s numbers improving, Kansas City Southern was down for four days in a row.
Other railroads, like Union Pacific, are also at risk, Paterson argues, but less so. Union Pacific only has 10% of its revenue come from Mexico. The rest is generated in America.
Mexico’s currency, the peso, reflects the risk Trump poses to Mexico’s economy. So far this year, the peso is down 11%.
“There is a definite correlation…the idea of Donald Trump’s wall and everything else is having an impact on Mexico’s peso,” says Ihab Salib, head of international fixed income at Federated Investors.
But on Monday — when voters surveyed across the spectrum showed Clinton won the debate — the peso rallied over 2%. Salib says the peso will fluctuate along with future debates and polls.
Trump has threatened Mexico left and right. He wants Mexico to pay for a wall along the U.S. border. He says he might put tariffs of 35% on some goods made in Mexico and sold in America.
And he wants to renegotiate or tear up NAFTA, the free trade deal between Canada, Mexico and the U.S. Trade experts say ending NAFTA would be bad for all nations, but particularly Mexico because it exports 80% of its good to the U.S.