ICE USD index has risen by 18% this year, close to its highest level in decades. In the upcoming earnings season, a strong dollar may put pressure on the profits of large U.S. multinationals. A recent analysis shows that a strong dollar may curb the returns of investors holding the S&P 500 fund in the next few years; on the other hand, a strong dollar means that overseas stock markets that have suffered hard-hit are now cheaper, and the Japanese stock market is particularly attractive.
However, investors should not bet on the US dollar. We have seen the past trend of the US dollar, but the future trend is uncertain. In fact, there has been controversy on this issue. Some people in Wall Street believe that the US dollar is not as strong as it seems, and some people believe that the way to measure the US dollar's rise is wrong. The movement of the
financial system is relative. For example, an investor lost 56% this year due to holding AMC Cinemas (AMCh), that is, the stock price has fallen so much based on the dollar he holds. However, if the investor's main savings are yen, then his dollar-denominated stocks have at least a favorable exchange rate effect, and the loss has been reduced to 45%.
In the G10 currencies, the euro and yen look cheap
buy on dips
From the perspective of price-to-earnings ratio, stocks in Europe and Japan look cheap.
Comments: Data as of September 29
Source: JPMorgan
Wonderful Highlights:
1. Will the strong US dollar bring an impact to the global foreign exchange market and capital markets, and will it prompt the birth of the new " Square Agreement "?
2. How effective is the strong dollar in curbing high inflation in the United States? Will the Federal Reserve suspend interest rate hikes ?
3. Some analysts believe that the US dollar is overvalued, the euro and the yen are undervalued. An analysis of the exchange rate trend since 1970 shows that overvalued currencies will fall in the next three years and undervalued currencies will rise. In this three-year period, stocks in high-exchange countries lag 11 points behind, and stocks in low-exchange countries performed 9 points higher. What is the reason?
4. As the pressure on US dollar to profits from strong US companies will further lead to a decline in US stock market returns. Analysts are more optimistic about investment opportunities in Japan and emerging markets. What stocks and funds do they recommend?
