Despite a fresh wave of rising tariffs, Wall Street appears unfazed, with stock indexes reaching new peaks last week. A robust start to the earnings season saw 83% of S&P 500 companies surpassing forecasts, fueling market optimism.
One key driver behind this growth is the weakening dollar, with the DXY index dropping 7% since the start of the year due to declining demand. This currency decline boosts the profitability of companies with international operations, with each 10% drop in the dollar adding 2-3% to S&P 500 earnings per share.
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Multinational corporations like 3M, PepsiCo, and Netflix have credited their strong second-quarter results to favorable exchange rates, highlighting the currency’s tailwind. However, the biggest beneficiaries are the tech giants of the “Magnificent Seven,” which derive 49% of their revenue from abroad — well above the S&P 500 average of 28%.
This foreign revenue cushion has helped these companies thrive, even as tariff pressures loom. While the market seems to shrug off the tariff threat for now, the long-term impact on global supply chains and inflation remains a wildcard worth watching.
