Dollar damnation

The simple math on S&P 500 earnings from currency is that for every percentage point increase on a year-on-year basis it’s approximately a 0.5x hit to EPS growth. At today’s 16% year-on-year level, that translates into an 8% headwind for S&P 500 EPS growth, all else equal. Of course, things can change quickly, but it doesn’t seem likely until M2 growth stops slowing, which will require a Fed pivot. The main point for equity investors is that this dollar strength is just another reason to think earnings revisions are coming down over the next few earnings seasons.