Strong US dollar to test 'recurring phenomenon' this earnings season
Published On Jan 13, 2025, 2:51 PM
The US dollar has surged recently, which could significantly impact corporate earnings this earnings season. Specifically, a stronger dollar tends to negatively affect companies that rely heavily on overseas business due to unfavorable foreign exchange conversions. Analysts expect increased dispersion in earnings per share (EPS) revisions, creating varied performance outcomes across the stock market. Companies with international exposure might struggle to maintain earnings growth, while those focused more on domestic demand may perform better, despite the currency impacts. Overall, select sectors, particularly services, are showing stronger earnings revisions, which could present investment opportunities amidst this environment.
Stock Forecasts
XLY
Negative
Given the expected strength of the US dollar and its likely negative effects on companies with significant overseas operations, investors may want to focus on domestic-centric companies or ETFs. Consumer goods sectors might underperform, while sectors like services may see stronger earnings revisions.
VFH
Positive
The stronger dollar could negatively affect earnings for international companies. Investors should consider focusing on stocks that benefit from domestic demand, such as in the services sector. This aligns with the expected stronger performance of industries not heavily impacted by foreign exchange fluctuations.
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