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Be Cautious of Dollar-Sensitive Stocks

Markets

Be Cautious of Dollar-Sensitive Stocks

Close up of stacks of bank notes

Close-Up of stacks of 100 Dollar Bills

It is easy to conclude that the stock market is going to go on a decline, at least for the short term, because of the strong dollar. If you think this way, you are leaving a lot of money on the table. The conventional wisdom is trending this way. This is also precisely why there is a lot of opportunity for savvy traders.

Not all American companies are going to get hit equally bad by the strong dollar. While the United States is plugged in to the rest of the world, and does a lot of business with global players, a large chunk of the U.S. economy is actually insular. There are many insular companies that get the bulk of their revenues and business from within the borders of the United States. These are the types of companies that should weather both the ongoing strengthening of the U.S. dollar and the decline in global growth rates.
Global consumption is on a downward trend. American multinational companies that pump out exports and have a lot of licensing deals in overseas markets are the most vulnerable. Thankfully, these are not the only companies in the stock market. Be on the lookout for companies that are completely insular. These might be the great value buys as the market goes through some turbulence due to the double whammy of a strong dollar, which depresses U.S. exports, and slowing global demand.
While there is a lot to be excited about the falling price of oil, it is beginning to look like the price of oil is crashing precisely because the global economy is slowing down. Regardless, there is a lot of opportunity to make money when there is a broad sell-off due to fears of a global slowdown. The big opportunity is in stocks that are primarily driven by U.S. growth and U.S. internal economic factors. As long as the baseline figures of U.S. economic health remain positive, these companies may make for great buys.

 

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