Fading Dollar Boosts US Stocks
As the dollar continues to weaken, US stocks are garnering further support and attracting investors from overseas as the US stock market reaches a record high. In March, when the coronavirus pandemic first shook up the financial market, the dollar spiked as companies saved cash to cope with the global crisis and investors made safe choices, but the dollar has since taken a downturn as the US economy starts to grow.
The Role Of Foreign Investors
Since the 20th March, the dollar index experienced a loss of 10.3%. The index hit a two-year low in July and has failed to recover since.
According to Goldman Sachs, foreign investors are expected to spend approximately $300 billion on US stocks in 2020 as the dollar falls, making them the largest percentage of buyers in the market.
US companies have dominated the market in previous years via huge buyback programmes, but they have been forced to cut back to save cash due to the financial impact of the pandemic.
Companies that lie within the S&P 500 benchmark list of US stocks sell up to a third of their products overseas, and a falling dollar makes these products more appealing as revenue flatters after being converted back into US currency.
Changes In The Technology Sector
Companies with high exposure overseas have also reaped the benefits of recovering economies in Asia and Europe in June and July when the United States experienced a surge in COVID-19 cases.
The technology sector in the United States is said to be performing the best this year as it drove the S&P 500 to a record high.
Over 50% of the revenue from the technology sector comes from overseas as foreign investors rely on the US market to source companies that produce disruptive technologies.
The fall of the dollar is also expected to offer a boost to energy groups and materials companies and dollar movements are expected to become more and more valuable in the coming months.
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