Currencies trade relative to each other, so it is understandable why we are seeing a strong dollar. The dollar is gaining as there is a flight to quality in the global markets. Investors place money into U.S. Treasury bonds to essentially hide from the grief they feel in their own economies.
A strengthening dollar should not hurt earnings as much of the turmoil has been priced into the market. A company like Costco Wholesale Corp. (NASDAQ: COST) that derives most of its sales from the United States, trades at a 25 times earnings, while Wal-Mart Stores Inc. (NYSE: WMT), with a bit of international exposure, trades at 13 times earnings. Stocks are priced on expectations of six to 12 months down the road, so any reservations about international exposure are built into the price.
Even domestically, we have quite a load of events that will likely impact our economy and stock markets, including, the Supreme Court decision on health care; the presidential election, and the U.S. debt cliff. With the world’s investors turning to U.S. Treasurys for safety, we advise our long-term investors to seek stocks for the dividends.
Time and again, we have investors inquire about Master Limited Partnerships. We feel there is not enough transparency in the operations of these partnerships. Additionally, when you receive money, you often have to question: Is it a return of capital or new money?
On the other hand, we feel companies like Southern Company (NYSE: SO), who pays a 4.25% dividend, are not going anywhere soon. Publicly traded companies are required to have transparency in their management and their financials, so we know the dividend should be well covered by earnings. With the market trading relatively flat for the past month and Treasury rates yielding all-time lows, we believe the stock market is the place to invest.
At Henssler Financial we believe you should Live Ready, which means understanding your investments and how they may act in the future. If you have questions regarding your holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.