The dollar is trading stronger than it has in years and that's great news for folks filling up their gas tank or exchanging money on a European vacation. According to MarketWatch columnist Jeff Reeves, that's where the benefits end for most. In fact, he says a strong dollar could wreak havoc on investors in 2015:
"One of the biggest risks to most investment portfolios is the continued weight of a strong dollar holding back key asset classes. And investors who don’t understand or acknowledge this could pay the price."
Reeves delves into the reasons. First, large U.S. companies will experience smaller sales numbers in international markets. If you're highly invested in a company that does a lot of business overseas, expect to see your profits dinged:
"They do a high volume of business overseas, and since those sales are recorded in currencies that are comparatively weaker, it’s like these multinationals are actually selling their goods at a discount.
Reeves goes on to explain how a strong dollar will weaken commodity stocks and emerging markets, each for similar reasons to the above. We're basically looking at John Donne's "no man is an island" on an international economic scale.
"If an emerging market be washed away by the sea,
Americans are the less, as well as if a dollar were"
Basically, we're all in the same boat here so Americans should be wary if their strong currency is set to cause problems for folks across the globe.
Be sure to check out the whole article (linked below), especially to hear Reeves' tips for protecting your portfolio in 2015.
Read more at MarketWatch
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