King Dollar Emerges as Fresh Threat for Big Tech Earnings Views
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The surge in the dollar is darkening the earnings outlook for US multinational companies from Amazon.com Inc. to Apple Inc., leaving investors to question how much longer the stock rally can withstand the greenback's strength.
The world's reserve currency has climbed nearly 7% from its September low near its strongest level since November 2022, threatening Big Tech shares with lofty valuations that have powered the S&P 500 Index 's bull market for two years on soaring profit growth.
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Here's what history says about whether you should buy now or hold off. Is it safe to invest now? Nobody can predict where stocks will be a few months or a year from now, and new policies out of Washington could change things on a dime. However, several scenarios are possible. For one, stock prices could continue soaring like they have over the past few months. If that happens, right now would be a fantastic time to buy to see immediate gains. Scenario two is that the market takes a sharp turn for the worse, like it did earlier this year amid tariff uncertainty. Between February and April, the S&P 500 fell by close to 20%, leaving many investors panicked and eager to sell. But those who stayed the course and held their investments reaped the rewards when the market quickly rebounded. A similar situation played out in March 2020, when the S&P 500 experienced one of the fastest crashes in history at the start of the pandemic. The short term was rough, but the S&P 500 has since earned total returns of nearly 112%. The third scenario may be the one that concerns investors the most: a prolonged recession. But even if that is on the horizon, investing at record-high prices doesn't necessarily mean you'll lose money. A market downturn may result in your portfolio losing value. But if you hold your investments until the rebound without selling, you likely won't experience any actual losses. Say, for example, you invested in an S&P 500 index fund in December 2007. The market was reaching record highs at the time, but it was about to slip into the Great Recession, which would last until 2009. In that time, your investment would have plunged by more than 50%. Selling at any point during that recession could have locked in significant losses, since you would have likely been selling your investments for far less than what you paid for them. 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