Shares of Citigroup (C 2.89%) charged higher by 5% on Tuesday, leading the way on a strong day for financial stocks and the broader market, as investors' hopes rose for an easing of trade tensions. Given Citi's significant exposure to Mexico, the company figures to benefit more than most of its peers if a dispute between the U.S. and its southern neighbor can be avoided.
The markets rose on Tuesday after Mexican President Andres Manuel Lopez Obrador said he was optimistic his country will be able to come to an agreement to avoid new tariffs threatened by the White House.
Citi owns the second-largest bank in Mexico thanks to its 2001 purchase of Banamex Financial Group, so among large U.S. banks, it is uniquely exposed to that nation's economy. Overall, Citi has operations in more than 160 countries, including a large banking and wealth management operation in Asia, so the company's share price has been more reactive to ebbs and flows in the trade negotiations with China.
Citigroup trades at a discount to big-bank rivals including Bank of America, Wells Fargo, and JP Morgan Chase due to its international exposure. But the company's shares have outperformed those other banks so far in 2019 -- they are up 25% year to date.
If trade tensions do ease, its shares could have more room to run, but given the headlines we've seen in 2019, that's a big "if." For long-term investors, Citigroup is attractively priced now, but don't be surprised to see volatility in the shares in the months to come.