With the US dollar taking a breather in the last couple of days, our index of Internationals has caught a bid in the early going today as it attempts to stabilize from a drop of just under 10% since late April. For those unfamiliar with our Internationals index, using our International Revenues Database, we classify any S&P 500 company which derives more than 50% of their revenues from outside the United States as part of the Internationals index, while any S&P 500 company which derives more than 90% of their revenues in the United States is part of our Domestics index.
The chart below shows the performance of both indices over the last 12 months, and given the relative weakness of the rest of the world’s economy versus the US, our Domestics index has consistently outperformed the Internationals. Since late May, though, the gap really widened as Internationals fell sharply in response to heightened concerns regarding global trade and possible retaliation from China and other countries in response to US tariffs on imports. Through the early going on Tuesday, the Domestics index is up 7.9% over the last year and down less than 2.5% from its recent high. The Internationals index, meanwhile, is down 2.91% over the last year and nearly 10% from its high less than six weeks ago.
In the second chart, we show a comparison between the Bloomberg US Dollar Index and the performance spread between the Domestics and Internationals indices over the last year. Typically, when the dollar is strong, Domestics outperform the Internationals and vice versa. That’s exactly what we are seeing now, as both the Dollar Index and the outperformance of Domestics relative to Internationals are right near 52-week highs. Going forward, any signs this week from the litany of Fed speakers that they are coming around to the market’s view of cutting rates sooner rather than later would likely pressure the dollar and lead to a boost for the Internationals. We could be seeing some early signs of that today as the Internationals index is bouncing from very oversold levels and trading higher by 1.7% compared to a gain of just 0.8% for the Domestics. Choose one of Bespoke’s three premium subscription options for our most actionable research.