Don't Discount the Dollar
Monday, November 1, 2010 at 04:37PM The average stock in the S&P 500 has rallied 14.33% since the start of September. The US Dollar index has declined more than 7% over the same period of time. This decline in the dollar has had an impact on stocks in the form of international sales. When the dollar declines, companies that generate a large portion of their sales outside of the US stand to benefit. As shown below, the S&P 500 stocks that generate more than 50% of their revenues outside of the US have averaged a gain of 17.55% since the start of September. The stocks with no revenues outside of the US have only averaged a gain of 10.36%.
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Reader Comments (2)
This is nice...it would be cool to see the companies which have a high correlation to the dollar.
This should not be a big surprise. As our Fed prints more money, much of it flows to foreign countries with faster growth where it is invested and produces a better return. Selling dollars and buying foreign currency. This pushes the relative value of our dollar down. When this happens companies that have exposure to such markets can maintain their value. Whereas the relative value of companies that continue to produce only in our market in dollars will continue to decline.