Over the past 3 years, the dollar is higher vs a basket of major currencies by 21%. According to Factset, about 50% of sales are earned abroad by companies in the S&P 500, compared to just 20% in the Russell. Back in 2015, when the dollar rose by 7% from January through March, the strong dollar wreaked havoc on American multinationals — dinging earnings by about 11%.
Lo and behold, the dollar index is higher by more than 6% since October and markets are celebrating as if the second coming of the dot com bubble had just been announced. As of right now, the dollar is higher by 0.75% v the euro, +0.21% v the yuan, +1% v the yen and the dollar index is ripping higher by 0.6%. At some point, American multinationals will fess up to the fact that a bubbling higher dollar is scornful for their prospects. Earnings revisions will be made, taking into account the sudden jolt in fx markets and the SPY will reflect that reality.
Until then, however, it doesn’t appear Wall Street is in the least bit interested in disrupting their spiked egg nog induced euphoric feeling, as markets wistfully drift …read more