The One Company to Watch as the U.S. Dollar Strengthens79 views 2013-07-08 00:52 Tags: investment corporate determine starting blank
With corporate earningsseason starting today, many investors will eagerly be looking at the results to determine if there is an investment opportunity for the next six to 12 months.
But wise investors will also be keeping an eye on the macroeconomic situation: we are entering a period of time in which the U.S. dollar will remain strong as our economy is set to outperform those of most other developed nations. As I’ve previously mentioned in these pages before, the outlook for the eurozone remains weak, China’s economy is slowing, and Japan’s economy is just now trying to emerge from having virtually no growth over the past decade.
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The strength of the U.S. economy is relative—though it is better than its competitors, it is not growing at a very rapid rate. However, remember: the strength of a currency is based on relative value, not absolute.
That relative strength in the U.S. economy will translate into a stronger dollar, higher corporate earnings and investment opportunities. As a large investor, for example, I would much rather be invested in U.S. assets than European assets.
While a stronger dollar hurts exports, it improves the corporate earnings of importers. A perfect example of the recent shift is Starbucks Corporation (NASDAQ/SBUX).
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