Q. The U.S. dollar has been up 22% in 9 months and hurting U.S. firms selling overseas and their earnings. What an investor could do to deal with such current risk?
A. With a strong U.S. dollar, the exporting U.S. firms are hurt by not only weak sales, but also by weak earnings as they convert the sales back to dollars.
There are two simple strategies an investors can use to deal with such strong U.S. currency risk:
1. Invest in Truly Domestic Stocks
Large cap stocks tend to have more exposure to overseas market, but there are many service-oriented firms with most of their businesses in the domestic market. Looks for good investment candidates in small and medium cap categories.
2. Invest in Overseas Stocks
Analysts expect European earnings to beat S&P 500 results in 2015, thanks to the weak euros. A good investment option is Vanguard European Stock Index (VEURX), its expense is only 0.26%.
A. With a strong U.S. dollar, the exporting U.S. firms are hurt by not only weak sales, but also by weak earnings as they convert the sales back to dollars.
There are two simple strategies an investors can use to deal with such strong U.S. currency risk:
1. Invest in Truly Domestic Stocks
Large cap stocks tend to have more exposure to overseas market, but there are many service-oriented firms with most of their businesses in the domestic market. Looks for good investment candidates in small and medium cap categories.
2. Invest in Overseas Stocks
Analysts expect European earnings to beat S&P 500 results in 2015, thanks to the weak euros. A good investment option is Vanguard European Stock Index (VEURX), its expense is only 0.26%.
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