Yahoo confirms Baron's domestic stocks story>>>
US stocks with firm home ties lead market
By Vivianne Rodrigues, Arash Massoudi and Michael Mackenzie in New York
The share prices of US companies with a strong domestic presence are significantly outperforming their multinational rivals in the S&P 500.
The trend is being reinforced by the latest round of results from corporate America, which has highlighted the pain of a strong dollar for those companies that rely on overseas revenues. Weaker-than-expected growth in the eurozone and emerging markets also has been a feature of the current first-quarter earnings season.
The strong US dollar has already hurt IBM’s first-quarter results. Industrial bellwether Caterpillar lowered its full-year earnings forecast on Monday.
“Consumer spending growth is now consistently coming from North America, while it has been shrinking in Europe and has been uneven at best in places like Asia and Latin America,” said Oliver Pursche, a portfolio manager at Gary Goldberg Financial Services.
Jeffrey Immelt, chief executive of industrial conglomerate General Electric, told investors last week the company had expected a lacklustre performance in Europe similar to 2012, “but it was even weaker than we had expected”.
The relationship between share price performance and domestic revenues in the past 12 months is seen across all the 10 major groups in the S&P, according to data compiled by Bespoke Investment Group. Within the S&P, telecoms companies have risen 30 per cent, while technology has dropped more than 3 per cent.
This gulf reflects how telecoms generate nearly all of their revenues from within the US while tech companies rely on more than half of revenues from foreign markets.
Investors are responding to the shift by aggressively buying stocks in sectors such as healthcare and consumer staples, where revenues are heavily orientated to the domestic economy. The two sectors are the top performing groups in the S&P this year, up 20.1 and 18.3 per cent, respectively.
US stocks with firm home ties lead market
By Vivianne Rodrigues, Arash Massoudi and Michael Mackenzie in New York
The share prices of US companies with a strong domestic presence are significantly outperforming their multinational rivals in the S&P 500.
The trend is being reinforced by the latest round of results from corporate America, which has highlighted the pain of a strong dollar for those companies that rely on overseas revenues. Weaker-than-expected growth in the eurozone and emerging markets also has been a feature of the current first-quarter earnings season.
The strong US dollar has already hurt IBM’s first-quarter results. Industrial bellwether Caterpillar lowered its full-year earnings forecast on Monday.
“Consumer spending growth is now consistently coming from North America, while it has been shrinking in Europe and has been uneven at best in places like Asia and Latin America,” said Oliver Pursche, a portfolio manager at Gary Goldberg Financial Services.
Jeffrey Immelt, chief executive of industrial conglomerate General Electric, told investors last week the company had expected a lacklustre performance in Europe similar to 2012, “but it was even weaker than we had expected”.
The relationship between share price performance and domestic revenues in the past 12 months is seen across all the 10 major groups in the S&P, according to data compiled by Bespoke Investment Group. Within the S&P, telecoms companies have risen 30 per cent, while technology has dropped more than 3 per cent.
This gulf reflects how telecoms generate nearly all of their revenues from within the US while tech companies rely on more than half of revenues from foreign markets.
Investors are responding to the shift by aggressively buying stocks in sectors such as healthcare and consumer staples, where revenues are heavily orientated to the domestic economy. The two sectors are the top performing groups in the S&P this year, up 20.1 and 18.3 per cent, respectively.
