© Reuters. U.S. companies with high foreign revenues are more challenged than their domestic peers – Jefferies
By Sam Boughedda
In a note focused on U.S. stocks, a Jefferies analyst said companies with high foreign revenues are likely to be more challenged than their domestic counterparts.
“US financial conditions deteriorated last week, led by a massive sell-off in credit,” the analyst said. “There has been a remarkable decline in the number of companies raising their prices. The risk to our sector allocation and bias is not necessarily a recession, but if US real wages improve significantly, forcing the Fed to raise rates, which will put pressure on multiples.”
He added that the company had ended its “bad style pricing (Long Dividend Aristocrat vs MSCI Momentum) initiated on April 5, 2022”.
“We were too early on the basket of stocks benefiting from a weaker dollar and improving US financial conditions. We chose to hold them given that we are somewhere near the peak of ‘pessimism’. We have recently reset a long position in volatility stocks. We are opening a position to turn away from companies with high foreign income, “he said.
“The market has widely discounted a 75 bps rise this month (Jefferies 50 bps). The US OIS curve peaked around 3.75% from 3.4% a year later in In addition, it’s worth remembering that a 10% move in the trade-weighted dollar is equivalent to a 50-75bp hike in US rates. again. In another sign of pessimism, the Conference Board’s CEO Business plunged into pandemic lows. Sentiment remains firmly bearish,” the analyst added.