Last month I said if one word were to describe the first quarter of 2022 it would be chaos. The chaos has continued as we head into the last month of the second quarter…
The fact is, the S&P 500 has continued to oscillate after hitting a new low and bouncing back last Friday on improving trading volume. However, while we’re not out of the woods yet, things are looking up — especially for fundamentally superior companies that are prospering in the current environment. (More on that in a moment.)
One big drag on the S&P 500 right now is that a strong U.S. dollar combined with weak economies outside of the U.S. is hindering many multi-international companies. Approximately, half of the S&P 500’s sales are outside of the U.S. A strong dollar is a drag on those companies being paid in eroding currencies.
In today’s Market360, I’m going to share a little bit more about the state of the U.S. dollar and what it means for the market. Then, I am going to reveal where I see the best opportunities in the current environment…
The Dollar’s Dominance
While inflation, still at 40-year highs, seems to have peaked in the U.S., the same can’t be said for other countries.
Like the U.S., the United Kingdom has been raising its key interest rates. There just hasn’t been the deflationary effect we’ve seen in the U.S.
Britain’s Office of National Statistics announced that consumer prices rose at a 9% annual pace in April, compared to a 7% annual pace in March — the highest the UK has seen in 40 years. Also, it hasn’t had any luck shoring up the British pound.
The euro isn’t doing any better. The euro (which still has negative key interest rates) has fallen over 13.5% compared to the U.S. dollar in the past year. So, inflation in the eurozone is also expected to rise.
The economic woes abroad are helping to reduce demand and put downward pressure on inflation. But unlike the UK and the European Union (EU), here in the U.S. we are blessed with the strong U.S. dollar.
The Wall Street Journal’s dollar index has risen an impressive 8% this year. I should add that The Wall Street Journal raised the possibility that the euro may hit parity with the U.S. dollar after recently hitting a low of $1.035 earlier this month. (In fact, I think the euro could hit 95 cents relative to the U.S. dollar in the upcoming months.)
The only “glitch” associated with a strong U.S. dollar is, like I said, that approximately half the S&P 500’s sales are outside of the U.S. So again, some multi-international companies may post slower sales growth from getting paid in weak currencies and operating in slowing economies around the world. As a result, domestic stocks are expected to continue to outperform some multi-international stocks for the foreseeable future.
The good news is my Growth Investor stocks are uniquely suited to profit from the current environment.
How to Profit U.S. Dollar Strength
In Growth Investor, the commodity inflation that we are prospering from is expected to persist because countries with weak currencies, such as Britain and Germany, are still experiencing hideous inflation.
Thanks to the Federal Reserve and a strong U.S. dollar, we’re experiencing a massive institutional shift in the components in the S&P 500 that will boost many of my Growth Investor stocks substantially higher for the foreseeable future.
The underlying fundamentals associated with my Growth Investor stocks are truly “out of the park” with 61.8% annual sales growth, 448% annual earnings growth, 82.6% annual dividend growth and median forecasted earnings of 10.6! It’s apparent that the energy, fertilizer and shipping stocks that dominate the Growth Investor Buy List are poised to continue to prosper.
That’s why today I’m adding six new energy and fertilizer stocks to the Growth Investor Buy List, which have represented a “sweet spot” in the current environment.
I will go further in detail in today’s Growth Investor Monthly Issue for June. It’s scheduled to post just moments from this email hitting your inbox.
Join me at Growth Investor today so you can read the issue while it’s still hot off the presses!
P.S. U.S. Markets and InvestorPlace offices — including customer service — will be closed Monday, May 30, in observance of Memorial Day.
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