US Dollar Depreciation Is Cushioning 'The Impact Of Tariffs On Corporate Profits,' Says Expert

As the U.S. dollar is trading 8.02% lower year-to-date, this expert believes that the dollar depreciation is fueling the “powerful tailwind for multinational earnings.”

What Happened: According to Jeremy Siegel, a senior economist at WisdomTree, the U.S. dollar’s significant decline this year is strongly boosting multinational companies’ earnings.

He underscores in his weekly commentary that about half of the S&P 500 revenue comes from overseas, which could offset the negative impact of tariffs on corporate profits.

“With 40-45% of S&P 500 revenues sourced abroad, that currency translation effect alone could cushion the impact of tariffs on corporate profits,” said Seigel.

“This, alongside hopes of deal-making and eventual tariff de-escalation, is underpinning the market's recovery,” he adds.

Meanwhile, he continues to remain positive on the stocks as he explains that stock markets tend to overreact to recessions.

“While earnings may drop if the economy turns south, the long-horizon value of equities should not fall 20–25%, as often happens. If investors finally look "beyond the valley into the mountain," the downside could be limited even in a mild recession.”

See Also: Market’s Bet On Aggressive Fed Cuts Clash With Short Rate Market Data: Next Fed Chair Could Initiate ‘Cutting Cycle,’ Says Expert

Why It Matters: As of the publication of this article, the U.S. Dollar Index was trading 0.04% lower at the 99.79 level.

As the Federal Reserve is slated to announce its latest decision on interest rates on Wednesday this week, Siegel says, “Powell is likely to offer little beyond platitudes about data dependency and policy patience.”

However, according to him, the Fed should cut rates with the inverted yield curve structure, however, he reiterates that the Fed won’t cut.

The CME Group's FedWatch tool‘s projections show markets pricing a 97.6% likelihood of the Federal Reserve keeping the current interest rates unchanged on Wednesday.

Price Action: The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, fell on Monday. The SPY was down 0.57% to $563.51, while the QQQ declined 0.59% to $485.93, according to Benzinga Pro data.

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