All Articles

Dollar Strength: How it affects your portfolio (Part 1)

The U.S. dollar has strengthened considerably this year, up nearly 6%. This is unknown territory for many investors since the dollar was weak for much of the 2000s. There are several implications.9.26.14

  • Over the long-run, dollar strength is welcome since it is a sign of strength for the U.S. economy the result of foreign investment in the U.S.
  • Over the short-run, the implications are mixed. A stronger dollar could crimp U.S. exports and corporate profits. S&P 500 companies derive nearly half of their earnings overseas.
  • A stronger dollar could reduce the return on foreign investments as overseas currencies depreciate. Hedging a portion of ones overseas currency exposure can be beneficial in this regard. Over the long-run, however, currency movements tend to be a wash.
  • At the same time, a stronger dollar could boost foreign markets as their exports to the U.S. become more competitive.
  • Unhedged foreign bond funds, in particular, could struggle should the dollar strengthen.
DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.

What can we help you find?