After starting out the year on a positive note by rising five days in a row, the US Dollar index has reversed course and is now down 2.93% year to date. We wanted to see what impact, if any, the move lower in the dollar this year has had on stocks. When the dollar is rising, US companies that do most or all of their business within our borders stand to benefit, while US companies with large amounts of revenues outside of the country lose out. The opposite occurs when the dollar is declining -- companies with large amounts of international revenues benefit at the expense of the domestics.
With the dollar down so far this year, we used our International Revenues Database that tracks the percentage of international revenues for US companies to see if the names with large amounts of international exposure have been outperforming. To do this, we broke the S&P 500 into deciles (10 groups of 50 stocks) based on a stock's percentage of international sales and then calculated the average YTD % change of stocks in each decile.
As shown in the second chart below, the average YTD performance of stocks in the decile with the largest percentage of international revenues is 7.68%, which is by far the best performing decile. The average YTD performance for stocks with no international revenues is 3.09%. This performance is inline with what one would expect given the dollar's decline.
Going forward, if you expect the dollar to continue its decline, the stocks with large amounts of international revenues should continue to outperform. If you expect the dollar to reverse course and head higher, the stocks with little or no international revenues should start to pick up. Either way, you'll need our International Revenues Database to run the screens! This product is available to yearly Bespoke Premium and Bespoke Premium Plus members. Click here to sign up today.
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