A falling Greenback has been hard on American vacationers abroad but good for international investments and exports. Now that the buck is near its all time low, is it time to bet on a rebound? Or will the slide continue? The consensus: Economists predict that the dollar won't be bouncing back any time soon.
Lincoln Anderson, LPL's chief investment officer, is a contrarian. “I think the odds favor dollar appreciation, not further declines,” he says. Factors like a falling trade deficit, and the competitive pricing advantages that a low exchange rate provides, bode well for stateside companies. Indeed, from February 2006 through February 2007, American export growth (9.3 percent) has nearly tripled import growth (3.4 percent). (What a change from a year ago, says Anderson, when imports grew 14.1 percent and exports grew 12.3 percent.) As a result, the trade deficit has fallen from $68.9 billion in August 2006 to $58.4 billion in February 2007, according to government statistics.
Investing in international stocks, has been a dream over the last five years, but it could be time to take some profits. Since 2002, the EAFE Index (Europe, Australia and the Far East) has nearly doubled the performance of the S&P 500 and, according to Anderson, two-thirds of that return has come from the decline in the dollar-exchange rate. Anderson says he's pared back LPL's international and emerging markets exposure from 20 percent to 10 percent of portfolios, a move that he admits hurts now, but should pan out in the long run.
