The explanation for the fact that the fall of the dollar benefits US-based companies is that the currency effect increases the value of the 28 percent of sales at S&P500 companies that take place outside the US.
According to Goldman Sachs strategist David Kostin, one can translate a 10 percent decline in the dollar to a positive earnings effect for S&P500 companies of 2-3 percent – if one disregards other factors. The effect is even clearer among the technology companies on Nasdaq, which generate 45 percent of their revenue outside the US.
Based on the reports that have come so far, Kostin describes the season as unexpectedly strong, with 61 percent of reporting companies having higher profits than expected. This can be compared to the historical average of 48 percent.
He also notes that the price reactions so far show that investors are trying to look beyond the tariffs and instead focus on growth and profit prospects for 2026 when they assess the reports.
