The global economy is thriving, and it has led to the best earnings season for American corporations in the past 13 years.
Bloomberg reports that almost 80% of S&P 500 companies are set to break sales projections this quarter, with the health care and information technology sectors boasting the largest gains.
While Trump’s deregulatory promises have certainly helped, analysts attribute robust sales to a weak dollar combined with continued emerging market growth. A weak dollar decreases the hit transnational corporations take when they exchange their foreign sales back home, as well as making their products cheaper for foreign consumers.
“For multinationals, the news has been not just that their U.S.-based operations are doing well, but in some cases, that their overseas operations are doing even better,” said Mark Luschini, who helps manage $74 billion as chief investment officer at Janney Montgomery Scott. Companies in the S&P 500 get 44 percent of their revenue outside the U.S, he said.
Analysts also speculate that the stock market seems to have foreseen this growth, as the Dow Jones Industrial Average surpassing 21,000 and the S&P 500 Index topping 2,400 for the first time precluded this quarter’s stellar sales.
The dollar is purportedly weak due to the fact Congress has stalled on tax reform, said Walter “Bucky” Hellwig, a senior vice president at BB&T Wealth Management. If that’s the case, corporations should buy lawmakers all month-long trips to Hawaii.
“The dollar is going to contribute again in the third quarter,” Hellwig said.
Tech giant Facebook enjoyed burgeoning earnings as its ad revenue increased 50 percent and benefited from the emerging market growth of its Instagram photo-sharing platform. Asia-Pacific led gains in active users.
The health industry is booming, as well, with 86 percent of healthcare companies surpassing earnings projections.
It all comes back to what is turning into the domineering theme of the 21st century: Global economic interconnectedness.
“More of the global economy is participating in this recovery simultaneously, and that’s what shows up in the top-line results, particularly in technology,” said Jim Paulsen, chief investment strategist at Leuthold Group.
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