Insight
April 24, 2023
Edwin R. Barton
Chief Portfolio Strategist
The Dollar: Impact on Corporate Earnings
Changes in the value of the dollar, which is the world’s reserve currency, can have a significant impact on corporate earnings. The rally in the dollar through most of 2022 created headwinds for many large U.S. multi-national companies that derive a significant part of their revenue from overseas.
The U.S. Dollar Index (DXY) opened 2022 at 95.67 before rallying 20% and peaking at 114.77 on September 27th. Since companies in the S&P 500 receive almost 40% of their revenue from countries outside the U.S., the unfavorable exchange rates caused a drag on corporate earnings throughout 2022.
Apple, Nike, and McDonalds are among the many companies who said foreign exchange headwinds negatively impacted their revenue performance last quarter.
Since that September peak, the U.S. Dollar Index has fallen over 11%, closing at 101.61 on April 3rd, 2023. The drop in the value of the dollar over the last six months should function as a cushion and help bolster earnings for companies with significant operations overseas. Expect the favorable exchange rates to become a tailwind for corporate profits when companies begin reporting earnings for the first quarter.
Mastrapasqua Asset Management, Inc. does business as M Capital Advisors. If you have a question or need further information, please contact:
Edwin Barton, Principal, Chief Portfolio Strategist in Nashville at 615-255-9898, edwin@mcapitaladv.com
Claude Koontz, CFA, Principal & Portfolio Manager in San Antonio at 210-353-0519, ckoontz@mcapitaladv.com
© 2023 Mastrapasqua Asset Management, Inc. All rights reserved.
The information and opinions contained in this report should not be treated as fact or as insight that will produce desired investment results over time. Investment conclusions always bear risk, and that risk may not be reasonable for any particular reader. Obviously the writer, even assuming good intentions, does not know of the reader’s particular financial circumstance and therefore is not able to assess the propriety of whether a named security makes sense as part of a given individual, family, or institutional portfolio. Mastrapasqua Asset Management clients may, from time to time, own some of the companies mentioned. We hold out no duty to give readers of this column advanced notification of when we may change an opinion. Investors should receive investment advice based on an assessment of their own particular investment circumstances and not on the basis of recommendations in this report. Past performance is not indicative of future returns.
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