In an interview with the Wall Street Journal on Friday, Donald Trump said the U.S. dollar was “too strong," in part because China artificially holds down the yuan. “Our companies can’t compete with them now because our currency is too strong. And it’s killing us,” he says. On the news, the U.S. dollar index is down more than -1% today.
However, like most things our Tweeter-in-Chief has been talking about lately, if you were brave enough to buy the dip in Boeing and Lockheed Martin, you've profited nicely from the short-term selloffs.
Here's a brief recap.
1. Boeing (BA)
The $98 billion aircraft manufacturer's stock fell more than -1% intraday on December 6th (following Trump's tweet below)... but, from the lows, shares are up 4.7%.
2. Lockheed Martin (LMT)
The $75 billion defense contractor's stock fell -2% on December 12th (following Trump's tweet below). From the lows, shares are up +2.7%.
3. Biotech stocks (IBB)
Shares of the subsector were down more than -3% on January 11th, after Trump offered up the statement below during his first press conference since the President-elect's Election Day victory:
"We have to get our drug industry coming back. Our drug industry has been disastrous. They're leaving left and right. They supply our drugs but they don't make them here, to a large extent. And the other thing we have to do is create new bidding procedures for the drug industry, because they're getting away with murder."
Shares of IBB have bounced back and are about flat from the January 11th lows.
U.S. Dollar Not "Too Strong." STRONG DOLLAR = STRONG AMERICA
#Exports #Economy #Trump
We think Trump is wrong to say the U.S. Dollar is "too strong." Contrary to Trump's statement, a stronger U.S. dollar is actually quite positive for the U.S. economy. Exports account for just 9% to 10% of U.S. GDP. Sure, a stronger dollar hurts exporters because companies are forced to sell their goods to foreigners whose currencies are relatively weaker against the dollar.
But, conversely, U.S. consumers can buy more goods with their stronger currency. Since consumption makes up roughly 70% of GDP, a strengthening dollar gives American consumers and the U.S. economy a boost, as imported goods are cheaper to consume.
The U.S. also exports capital goods. About 50% of American exports are heavy machinery and equipment. So essentially, we export production. This means that if U.S. consumers are flush with cash, foreign exporters will need to buy more machinery to meet American demand. This is a feedback loop that ultimately helps, not hurts, U.S. exporters.
What it all means...
We think the U.S. dollar reverberations today are overdone. In addition to recent Trump statement recoveries, the U.S. economy is growing once again. That should underpin further strength in the U.S. dollar.
