While the US dollar has dropped 8.02 % since the start of the year, this expert estimates that the drop in greenback is a decisive factor in strengthening the “powerful dynamic of multinational profits”.
What happened According to Jeremy Siegelprincipal economist at Wisdomtree, the sharp drop in the US dollar this year considerably stimulates the profits from multinational companies.
He underlines in his weekly commentary that half of the revenue from the S&P 500 index come from abroad, which could compensate for the negative impact of customs tariffs on business profits.
“With 40 to 45 % of revenues from the S&P 500 index from abroad, this exchange effect alone could amortize the impact of prices on companies’ profits,” said Seigel.
“This, combined with the hope of seeing agreements having passed and a possible decline in prices, is the basis of the rebound on the market,” he adds.
Meanwhile, he continues to remain positive on shares, explaining that stock markets tend to react excessively to recessions.
“Even if the profits could fall if the economy turned around, the long -term value of shares should not drop from 20 to 25 %, as is often the case. If investors finally look “beyond the valley in the mountains”, the drop in decline could be limited, even in the event of a slight recession. »»
-See also: Market engagement for an aggressive reduction in Fed rates is conflict with short -term market data
Why is it important At the time of the publication of this article, the United States dollar index fell 0.04 % to 99.79.
While the Federal Reserve should announce its last interest on interest rates on Wednesday, Siegel said: “Powell is likely to offer little outside banalities on data dependence and the patience of monetary policy. »»
However, according to him, the Fed should reduce rates, but the structure of the curve of reversing yields, he reiterates that the Fed will not reduce them.
The projections of the Fedwatch tool of the CME Group show that the markets estimate at 97.6 % the probability that the federal reserve maintains the interest rates unchanged this Wednesday.
Price movement The SPDR S&P 500 ETF Trust (Sneeze: spy) a laugh Invesco QQQ Trust ETF (Nasdaq: qqq), which follow the S&P 500 and Nasdaq 100 indices respectively, fell on Monday. The SPY fell 0.57 % to be $ 563.51, while the QQQ decreased by 0.59 % to $ 485.93, according to data from Benzinga Pro.
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