Morgan Stanley’s chief investment officer and chief US equity strategist, Mike Wilson, says multinational stocks are getting a boost due to the weakening dollar.
In a new CNBC Television interview, Wilson says that a US dollar decline is boosting shares of companies that do sales in other currencies around the globe, improving their market forecasts.
“For the multinationals, there’s no doubt that a weaker dollar is part of the story for why revision factors have continued to move, even [a] faster recovery than we expected. Actually, it is as powerful as we saw coming out of COVID, which is hard to believe, and part of that is the tailwind from that weaker dollar.”
Wilson also says that stocks are seeing a boost from other factors, including President Trump’s tariff policies lessening in their severity from when they were first announced in April, as well as advancements in artificial intelligence (AI).
“But there’s a lot of tailwinds. While the tariff situation is not resolved, it’s nothing like it was two, three months ago, and the numbers did come down in anticipation of those tariffs. It’s almost a reflexive move from just the revisions having been so pessimistic, and now we have these other tailwinds. The dollar being one, I think less bad tariffs is the way I would kind of condition it. And then, of course, the other drivers that we’re seeing now, with AI picking up, the tax bill going through, etc.”
Wilson adds that the declining price of oil may also give the markets a boost in the third quarter and absorb any potential tariff-driven inflation.
“At some point it does get fully priced in, and, oh, by the way, we can’t rule out that the dollar will have some strength at some point. In fact, technically, it looks like it may be making a bottom in the very short term. It’s an ever-evolving situation. I think the one that doesn’t get talked about much here more recently is just the precipitous fall in oil prices. And we know that oil prices now are down about 16% to 20% on a year-over-year basis, but gasoline prices are only down about 8% to 10% so that’s a new tailwind.
I think they could offset some of the tariff risk for the consumer going into the third quarter, because, quite frankly, the tariff risk is larger for the third quarter from an earnings standpoint, because this is where you’ll see to hit the cost of goods sold, which they were able to avoid in Q1 and Q2 because they were selling cheaper inventory in those two quarters. But I think that weaker oil price is going to be a good offset for the consumer in that regard.”
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