Call Our Offices
Your Money.
Your Life.
Your Way.
A Stronger Dollar Has Investing Implications
Shared by Strong Valley on October 10, 2022
a Stronger Dollar Has Investing Implications
Image of a stop watch for the in-brief section heading
Here's a quick look at what's in this article:

World currency fluctuations mean more than calculating your travel costs. Exporters win or lose every time currency rates fluctuate, affecting corporations and your portfolio. Here’s a brief overview of how that may look in global markets, how a strong dollar may affect U.S. exports, and the pros and cons of international investing.

Important Disclosure: Content on our website and in our newsletters is for informational purposes only. The information provided may (or may not) directly apply to your situation. We recommend that readers work directly with a professional advisor when making decisions in the context of their specific situation.

The strong dollar is much in the news lately. But most Americans, other than tourists beyond our shores, don't focus on what that means to them. For U.S. investors, the upshot is not great. In fact, for most, currency fluctuations worldwide (and not just that of the dollar) are an invisible force that they don’t reckon with until it’s too late.

Calculating currency valuations from one country to another is complex and, if you’re like most people, you don’t give the subject much thought until you get ready to travel. You might visit your bank to swap greenbacks for a few euros, but usually you just plan to use a credit card to cover your tab on the Spanish Rivera or at the Tuscan villa.

For corporations and for your portfolio, though, fluctuating currency rates carry much more weight.

A Stronger Dollar?

So what? Maybe you never plan to go to Europe. Your portfolio, likely containing international investments in its mutual funds, might still feel the fallout.

Let’s look at one past global monetary event back in 2015 when Switzerland reaffirmed the commitment to keep its franc at $1.20 to the European Union’s euro – then suddenly changed its position, sending the euro falling, the franc soaring and world markets reeling.

For one, German businesses suddenly found it much more expensive to buy Swiss watches, chocolates and cheese as Switzerland’s exporters were caught in a battle literally overnight. Meanwhile, Swiss citizens enjoyed welcome wealth.

Unlike Americans who may plan only an occasional trip to Paris, Swiss citizens commonly drive to France for the day. The currency move suddenly put an extra 15% to 20% of buying power into the hands of the Swiss who visit France.

Global Markets

We live in a global society, so understanding currency fluctuation means much more than calculating our travel costs and daily vacation spending. Exporters win or lose every time currency valuations change.

Keep in mind if the euro declines substantially against the U.S. dollar, for example, that new Mercedes is more affordable here but Apple iPhones cost much more in Germany than in this country.

Don’t feel too flush with the dollar’s comparative value. Nearly half the earnings in the Standard & Poor’s 500 come from companies based outside the U.S. Slowdown in global growth also dims outlooks for robust domestic growth as economists cite troubled overseas markets, volatile oil prices and, ironically, a stronger dollar.

International Investing

For most of us, international investing, whether overt or hidden in our mutual funds, comes with pros and cons:

Pros: Variation in ups and downs of the world’s markets means your diversification enjoys a chance to work better. Mixing asset classes with low correlation to one another usually guards against portfolio-wide losses – and you won’t find lower correlation anywhere than across some pairings of global stock markets and indexes.

Cons: For the risks in international investing, look no further than headline political turmoil, border wars and other upheavals that send shock waves through almost all the world’s markets. Less grandiose but no less devastating: Exchange rate risk if your money must be converted before you can invest.

Like all financial decisions, such as investing and retirement planning, the further out you plan your trip, the more successful your journey.

Remember to add the world’s currencies to your budgeting and investing discussions with your financial advisor.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results or even estimates of actual returns a client may achieve. This information is designed to provide general information on the subjects covered. Consult your financial professional before making any investment decision. Opinions and estimates offered are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Please see other important disclosures related to

Your turn – What would you like to know about A Stronger Dollar Has Investing Implications?

Strong Valley wants to provide useful and meaningful information to our clients, to our professional network, and to the broader community of people we serve. We’d love to hear your questions about A Stronger Dollar Has Investing Implications or about any other topics you care about. You can call our office directly, or use the contact form below to send us your questions and/or suggestions.  And if you found the information helpful or entertaining, we hope you'll share the Strong Valley story with others.

We love to hear your questions, ideas, and feedback!

  • This field is for validation purposes and should be left unchanged.
Copyright © 2024 Strong Valley Wealth & Pension, LLC
Investment advice offered through Integrated Partners, doing business as Strong Valley Wealth & Pension, a registered investment advisor. The information on this website has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Registration as an Investment Adviser does not imply a certain level of skill or training. Strong Valley Wealth & Pension, LLC offers some securities through M.S. Howells & Co. Member FINRA/SIPC. M.S. Howells & Co. is not affiliated with Strong Valley Wealth & Pension.
The link you have selected is located on another server. The linked site contains information that has been created, published, maintained, or otherwise posted by institutions or organizations independent of this organization. We do not endorse, approve, certify, or control any linked websites, their sponsors, or any of their policies, activities, products, or services. We do not assume responsibility for the accuracy, completeness, or timeliness of the information contained therein. Visitors to any linked websites should not use or rely on the information contained therein until they have consulted with an independent financial professional. Please click “Continue to Link” to leave this website and proceed to the selected site.