Post by Sien on Nov 27, 2021 14:35:51 GMT
The U.S. dollar this week climbed to highs not seen since July 2020 after Federal Reserve Chair Jerome Powell was renominated to the position. That decision gave a somewhat clearer outlook for monetary policy in the year ahead, including the likelihood of coming rate hikes.
Common wisdom is that multinational stocks tend to underperform when the U.S. dollar is strong — company profits made overseas are diminished when brought back to the U.S.
That’s not always the case, according to Ari Wald, head of technical analysis at Oppenheimer. He highlights technology stocks as one group that manages to buck currency headwinds.
“Even with the multinational exposure within the technology sector, we found that relationship really hasn’t held for much of the last 30-plus years. If you kind of think back to the late ’90s, you had a strong dollar and large caps outperforming versus small,” Wald told CNBC’s “Trading Nation” on Monday.
The U.S. dollar index has risen 7% over the past six months, for example, just as the XLK technology ETF has climbed 23%. That ETF, which holds Apple and Microsoft as its top components, generates more than half its revenue from outside the U.S.
Common wisdom is that multinational stocks tend to underperform when the U.S. dollar is strong — company profits made overseas are diminished when brought back to the U.S.
That’s not always the case, according to Ari Wald, head of technical analysis at Oppenheimer. He highlights technology stocks as one group that manages to buck currency headwinds.
“Even with the multinational exposure within the technology sector, we found that relationship really hasn’t held for much of the last 30-plus years. If you kind of think back to the late ’90s, you had a strong dollar and large caps outperforming versus small,” Wald told CNBC’s “Trading Nation” on Monday.
The U.S. dollar index has risen 7% over the past six months, for example, just as the XLK technology ETF has climbed 23%. That ETF, which holds Apple and Microsoft as its top components, generates more than half its revenue from outside the U.S.