Suppose an American company and a German company each generate 1/3 of their sales in America, USA and Asia.
Why would I have a greater currency risk with the American company?
In the end, they all generate 33% in euros, dollars and various Asian currencies, and in all cases I end up with the money converted into euros.
I myself have deliberately overweighted US equities in my portfolio, mainly for the reasons mentioned above and the fact that politics in the USA is much more business-friendly.
Why would I have a greater currency risk with the American company?
In the end, they all generate 33% in euros, dollars and various Asian currencies, and in all cases I end up with the money converted into euros.
I myself have deliberately overweighted US equities in my portfolio, mainly for the reasons mentioned above and the fact that politics in the USA is much more business-friendly.
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@Daxdaniel It is not only about income flows, but also about fixed assets at home and abroad. These are always converted back to the home currency for accounting purposes.
If you wanted to, you could probably construct a theoretical company that has very little exchange rate risk. But in practice, most US companies make 50%+ of their sales in the US and have most of their assets there.
However, I'm not deep in the subject, but the literature is unanimous that this risk/opportunity exists.
And I'm not going to start questioning fundamental research now.
I'm a big proponent of, if you don't understand it, and consensus exists in the scientific community about it, then just believe it! 😅
As for being business friendly, YES I agree with you, EVERYONE agrees with you... and that's why it's already included in the prices. (as you can see from the ratings)
I myself also believe that the USA will develop better economically.
But since everyone knows it, it's already in the prices. So for US stocks to outperform the rest of the world, they have to have a lot more earnings growth than is currently assumed. (https://de.wikipedia.org/wiki/Markteffizienzhypothese)
If you wanted to, you could probably construct a theoretical company that has very little exchange rate risk. But in practice, most US companies make 50%+ of their sales in the US and have most of their assets there.
However, I'm not deep in the subject, but the literature is unanimous that this risk/opportunity exists.
And I'm not going to start questioning fundamental research now.
I'm a big proponent of, if you don't understand it, and consensus exists in the scientific community about it, then just believe it! 😅
As for being business friendly, YES I agree with you, EVERYONE agrees with you... and that's why it's already included in the prices. (as you can see from the ratings)
I myself also believe that the USA will develop better economically.
But since everyone knows it, it's already in the prices. So for US stocks to outperform the rest of the world, they have to have a lot more earnings growth than is currently assumed. (https://de.wikipedia.org/wiki/Markteffizienzhypothese)
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