Market Rally continues into 2018
After a very strong 2017, U.S. equity markets again started 2018 in an exceptionally positive manner. In fact the year to date increase in January has already exceeded some analyst predictions for the entire year. Once more, the question arises, how sustainable is this rally?
The U.S. stock market has benefited from a strong global economy. The global markets are rising in concert with one another, in a convergence not often seen. Indeed, some foreign stock markets have performed even better than the U.S. However, during this time, the U.S. dollar has dropped dramatically in comparison to other currencies. So gains realized in other markets have to be discounted when recorded in U.S. dollars.
These currency risks are one of the reasons we choose to invest primarily in U.S. based companies. Another reason we are not investing directly in overseas markets is that the majority of our companies are themselves already doing business globally. These multinational companies carry our exposure to international markets, and they manage their own currency exposures.