You may have noticed that the US Dollar broke to new highs last week. No? OK, let's talk about it. After almost exactly one year of sideways consolidation at highs, the US Dollar broke to highs, continuing its bullish efforts. Looking further back, you'll see that the dollar has really been in a wide range since 2015, but this latest move pushes it almost to all-time highs.
So, why talk about the dollar and how does it affect you? Well, when the dollar is strong it benefits companies that get most of their revenues here in the States. Just think, strong dollar, strong domestic growth for companies selling mostly or exclusively domestically. If the dollar stays strong, then these are the companies investors will be running towards.
So, how can you find opportunities from this dollar run? First, you could look at an ETF for the lazy man's way to invest in a strong dollar. You would be looking at the Russell 2000
If you wanted to go on a stock picking spree then you could search for names that have much of their revenues (or even 100%) of their revenues here in the states. The benefit of this is that you could drill down into particular sectors you may want to focus on. Like financials? Sallie Mae
Maybe Consumer Staples are more your speed. If the dollar stays strong, then names in this space should do well - but what if the dollar does not continue and the economy weakens? Kroger
While none of these are specific recommendations now, hopefully this helps you understand how a strong dollar could be a tailwind for small cap domestic companies.
