The global economy has been through a lot lately, and it’s natural to wonder what the future holds for your investments. Luckily, Bank of America (BofA) has some predictions that could bring a glimmer of hope. As per their latest report, they foresee the dollar gaining strength in the near future. But how will this impact your portfolios? In this blog post, we’ll dive deeper into BofA’s insights and help you understand what it means for your investments. So, let’s get started!
BofA predicts the dollar will strengthen in the next 12 months
BofA Merrill Lynch’s currency strategists are predicting that the dollar will strengthen over the next 12 months. They expect the U.S. economy to continue to outperform other developed economies, and believe that this will lead to further interest rate hikes by the Federal Reserve. This in turn should support the dollar.
The strategists recommend that investors who are bullish on the dollar should consider buying into companies with a large proportion of their revenue coming from abroad. They also suggest looking at companies that have high foreign currency debt, as these will benefit from a weaker greenback. On the other hand, those who are bearish on the dollar may want to consider investing in commodities, which tend to do well when the dollar is weak.
What this means for your investments
BofA’s currency strategists are predicting that the dollar will strengthen in the coming months, which could have implications for your investments. Here’s what you need to know.
If the dollar strengthens, it could mean good news for companies that export goods to the U.S., as their products will become more competitively priced. This could be positive for stocks in sectors such as healthcare, technology, and industrials.
On the other hand, a stronger dollar could weigh on companies that rely on imported materials or have a large percentage of their revenue coming from overseas markets. Sectors such as consumer staples and energy could be adversely affected.
So what does this all mean for your investments? If you’re overweight in sectors that could benefit from a stronger dollar, you may want to consider trimming back your positions. And if you’re underweight in sectors that could be hurt by a rising greenback, now might be a good time to add to those holdings.
How to position your portfolio for a strong dollar
When it comes to positioning your portfolio for a strong dollar, there are a few things you can do to ensure that you’re positioned for success. First, consider diversifying your portfolio across different asset classes. This will help to protect your portfolio from the volatility that can come with a strong dollar. Second, be mindful of the sectors that are most affected by a strong dollar. Information technology, healthcare, and consumer staples tend to be more resilient to a strong dollar. Finally, don’t forget to rebalance your portfolio as needed. This will help you stay on track and keep your investment goals in sight.
5 stocks to benefit from a strong dollar
A strong dollar is good for stocks in general, but there are some that will benefit more than others. Here are five to keep an eye on:
1. Technology companies that export their products: A strong dollar makes U.S.-made goods more expensive overseas, which can hurt demand. But for companies that have a lot of sales outside the United States, a strong dollar can actually be a good thing. That’s because when their foreign earnings are translated back into dollars, they get a nice boost.
2. Companies that import raw materials: A strong dollar makes imported raw materials cheaper, which gives these companies a cost advantage over their competitors.
3. Companies with large international operations: A strong dollar hurts profits when they’re translated back into dollars, but it also makes it easier for these companies to expand their operations overseas.
4. Financial companies: A strong dollar benefits financial companies in two ways. First, it increases the value of assets held by foreign investors when they’re translated into dollars. Second, it makes it cheaper for these companies to borrow money in foreign currencies.
5. Multinational corporations: A strong dollar hurts profits when they’re translated back into dollars, but it also makes it easier for these companies to expand their operations overseas and to buy up foreign businesses at attractive prices
5 ETFs to benefit from a strong dollar
The dollar has been on a tear lately, and according to Bank of America, it is only going to get stronger. In a recent report, BofA said that they expect the dollar to continue to appreciate through 2019. This is good news for investors who have positions in ETFs that benefit from a strong dollar. Here are 5 ETFs that should do well if the dollar continues to appreciate:
1. CurrencyShares Japanese Yen Trust (FXY)
This ETF tracks the performance of the Japanese yen against the U.S. dollar. It is a great way to bet on a continued strengthening of the greenback.
2. PowerShares DB US Dollar Bullish Fund (UUP)
This fund tracks the movement of the U.S. Dollar Index, which measures the value of the dollar against a basket of currencies. A strong dollar will lead to outperformance for this ETF.
3. SPDR Gold Shares (GLD)
Gold is often seen as a safe haven asset and tends to do well when there is uncertainty in the markets. With the trade war between the U.S. and China heating up, gold could be in for a rally if investors start getting jittery again. A strong dollar will also add to gold’s gains as it makes gold cheaper for foreign buyers.
4. iShares 20+ Year Treasury Bond ETF (TLT)
This ETF provides exposure to long-term U.
Conclusion
Bank of America’s prediction that the US Dollar will strengthen in 2021 highlights the importance of staying up to date with market news and trends. It is also a reminder that even small changes can have an impact on your investments, so be sure to pay attention to any currency movements throughout the year. By understanding what this prediction means for you and being prepared for possible fluctuations, you can position yourself more effectively and make smarter decisions when it comes to investing within different currencies.
