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– Stock market and dollar
The Euro has recently depreciated significantly against the dollar. While it was close to 1.12 in mid-September when the polls gave Kamala Harris the winner, it came close to 1.04 at the end of November. The reason? “The interest rate differential: with rates higher in the United States and lower in Europe, investors will seek performance across the Atlantic», Explains Stéphane Deo, Senior Portfolio Manager at Eleva Capital and columnist for Capital. It is, in part, a Trump tradebecause the future president is seen as more pro-growth and more pro-inflation, therefore with higher interest rates. Result, three or four rate cuts from the Fed expected by the market which disappeared in less than three months and therefore a rising dollar, dissects the expert.
And it’s not over: if dear Donald Trump imposes customs duties, the dollar should appreciate. “Indeed, a customs duty is ultimately very close to a devaluation: it makes the price of imports expensive, as if the currency had been devalued. To compensate, the currency reacts normally by appreciating: more customs duties therefore mean a stronger dollar.», argues Stéphane Deo. The good news? This promotes a lot of European values. The market includes many stocks that are very exposed to the United States and whose turnover across the Atlantic will therefore be boosted by the change effect, explains the manager.
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Some of these values are so exposed that they have relocated their production tools partly to the United States or created subsidiaries. “The latter benefit from a double advantage. On the one hand, since they produce locally, they would be immune to customs duties if the new Trump administration were to increase them. On the other hand, since they make a profit in the United States, they will benefit from the corporate tax cuts promised by Trump. While enjoying the strength of the dollar when they repatriate their profits», notes Stéphane Deo.
We could therefore play on the revaluation of the dollar, but also on the dynamism of the American economy, via European actions. “The icing on the cake is that the European Stock Exchange trades at a significant discount compared to the United States. Of course, Europe almost always deals with a discount, of the order of 20% historically, but at present we are closer to 35%. An unusually strong discount which therefore allows exposure to the United States at lower costs», argues the expert. We even observe a large difference in valuation for files which are nevertheless very similar. The list is long, here are some of the most telling examples of significant PER differences (market capitalization compared to expected profits for the next 12 months, a traditional gauge of the degree of expensiveness of a stock): BP and Shell in comparison to Chevron or Exxon, British American Tobacco or Altria versus Philip Morris, Reckitt versus Colgate or finally Siemens Energy and GE Vernova.
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If we limit ourselves to French stocks, we can note among the listed companies with the most exposure to the United States the following names: Publicis with 59% of sales in the United States, Dassault Systems with 52%, Ubisoft 50%, Sanofi 48 %, Essilor and Sodexo both with 46%, Legrand 38% and Air Liquide 34%. “These stocks should therefore benefit to a large extent from the variation of the dollar», According to Stéphane Deo. And if you fear that the Trump administration will implement particularly punitive customs duties towards Europe, it should be noted that European companies have significantly increased their presence there. “Of the companies on the list above, around a quarter of the workforce is employed in the United States and just under half of the assets are located there. This is exactly what the new president wants, foreign companies relocating their activities to American soil», adds the manager.
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Readers of Momentum, Capital’s investment newsletter, were able to benefit greatly from the rise in the dollar on the stock market
If the fall in the euro against the dollar increases European competitiveness, we see in detail that certain companies can benefit from the windfall due to their strong presence in the United States, and as stock market valuations are particularly depreciated in Europe. , this is potentially a tempting proposition, according to the expert. Momentum, Capital’s daily premium investment letter, was able to correctly anticipate the surge in the dollar and the consequences of this phenomenon for the stock market, by making winning choices on the shares of companies listed on the CAC 40. By opting for a annual subscription, 5 months are free. To take advantage of it, simply click on the link inserted above in this article.
