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US Dollar Hits Highest in Three Months: 5 Domestic Picks

Nalak Das

The U.S. dollar is currently at its highest level since December 2018. Despite a growing U.S. economy, serious concern about an impending slowdown of the global economy is strengthening the dollar.  

At this juncture, investors are seeking solace in U.S. dollar. However, U.S. products are losing their competitive edge in the international market owing to a strong currency. Consequently, it will be prudent to invest in domestic business-focused stocks with a favorable Zacks Rank.

US Dollar Index Hits Highest Since December

On Mar 7, the ICE U.S. Dollar Index (DXY), which measures the greenback’s strength against a basket of six major currencies, touched 97.70 before closing at 97.39, its highest level since December 2018. Notably, the U.S. dollar rose 1.1% against Euro, which closed at 1.1182 per US Dollar, its lowest level since June 2017.

Eurozone’s Growth at Risk

On Mar 7, the European Central Bank (“ECB”) lowered 2019 growth projection for the 19-member Eurozone to 1.1% from its earlier projection of 1.7%. The ECB cited political problem in Italy and its government’s decision to increase deficit spending to 2.4% of GDP, and the prolonged Brexit related issues in the UK as major concerns.

On Feb 6, the European Commission (“EC”) lowered 2019 growth projection for the Eurozone from 1.9% in November to 1.3%. The primary reason behind sluggish growth rate is a massive slowdown in Germany – the largest economy of the Eurozone. The EC reduced Germany’s growth rate in 2019 to 1.1% from its earlier projection of 1.9%.

China’s Exports Suffer, Trims 2019 Growth Forecast

On Mar 8, China reported that the country’s dollar dominated export tumbled 20.7% year over year in February. Notably, exports rose 9.1% in January year over year. China’s trade balance in February came in at just $4.12 billion compared with $39.16 billion in January. Trade surplus with the United States trimmed to $14.72 billion in February from $27.3 billion in the prior month.  

On Mar 4, Chinese Premier Li Keqiang’s annual work report presented to the National People’s Congress pegged the country’s growth rate in the range of 6 - 6.5% in 2019. Notably, China’s growth rate in 2018 was 6.6%, its lowest growth rate since 1990. Economists surveyed by Bloomberg pegged China’s economic growth at 6.2% in 2019.

Bank of England Reduces UK Outlook

On Feb 4, Bank of England reduced the growth rate of the U.K. for 2019 to 1.2% from 1.7% forecasted earlier. Economic forecast for 2020 is also reduced to 1.5%. The root cause of an impending slowdown is the Brexit related problem. Consumer confidence weakened significantly and business establishments have almost frozen capital spending owing to prolonged Brexit problem.  

Softness in Japan’s Economy

Last month, Bank of Japan estimated that the country will grow at 0.9% in 2019 and the growth rate will slow down further to 0.5% in 2020. On Feb 21, Bloomberg reported that the Flash Markit/Nikkei Japan Manufacturing PMI fell to a seasonally adjusted 48.5 in February from 50.3 in January, its lowest reading since June 2016.

Why Domestic Stocks?

Investors are concerned that a rising dollar will hurt sales of U.S. multinational companies as their products will be more expensive in the international markets. Domestic business oriented companies are mostly immune to any external shocks since the United States is the lone market for their products. This will help them to outperform the broader market defying extreme volatility.

Our Top Picks

At this juncture, investment in domestic business-focused stocks will be fruitful. We have narrowed down our search to five such stocks each having a Zacks Rank #1 (Strong Buy) and strong growth potential. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five picks in the last three months.

Atlantic Capital Bancshares Inc. ACBI provides commercial banking products and services in the United States. The company has expected earnings growth rate of 27.2% for the current year. The Zacks Consensus Estimate for the current year has improved 4.6% over the past 60 days.

America's Car-Mart Inc. CRMT operates as an automotive retailer in the United States. The company has expected earnings growth rate of 73.6% for the current year. The Zacks Consensus Estimate for the current year has improved 6.5% over the past 60 days.

Boot Barn Holdings Inc. BOOT operates specialty retail stores in the United States. The company has expected earnings growth rate of 71.1% for the current year. The Zacks Consensus Estimate for the current year has improved 8.1% over the past 60 days.

YETI Holdings Inc. YETI designs, markets, and distributes products for the outdoor and recreation market under YETI brand in the United States. The company has expected earnings growth rate of 17.7% for the current year. The Zacks Consensus Estimate for the current year has improved 12.2% over the past 60 days.

The Bank of Princeton BPRN provides various banking products and services in the United States. The company has expected earnings growth rate of 15.7% for the current year. The Zacks Consensus Estimate for the current year has improved 2.1% over the past 60 days.

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America's Car-Mart, Inc. (CRMT) : Free Stock Analysis Report
 
Atlantic Capital Bancshares, Inc. (ACBI) : Free Stock Analysis Report
 
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