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Forbes
8 hours ago
- Business
- Forbes
USD Weakness - Cyclical or Secular U.S. Dollar Weakness
Cyclical or Secular U.S. Dollar Weakness? As seen on the Datagraphs® below, the U.S. Dollar Index has declined from a high in January from roughly 110 to 97 in April. Recently, it has risen slightly but remains near its 52-week lows. On a longer-term monthly chart, it is testing what looks to be very key support level at an uptrending line which has been in place for over a decade. A break below could confirm the first secular dollar bear market since the 2003-2008 period. There are several reasons for this decline. First, U.S. debt levels continue to rise, forcing the U.S. Treasury to continue to issue more notes and bonds. This oversupply of U.S. debt has weakened the dollar. Also, the ongoing trade turmoil has reduced the demand for dollars from U.S. trade partners. The U.S. runs a large financial account surplus. However, if international trade dislocations continue, the U.S. is likely to see lessening demand for the dollar and U.S. financial assets. This would represent a meaningful trend reversal from the last five years. Finally, the expectation of the Fed easing later in the year has also impacted demand for the currency. Figure 1/2: Weekly and Monthly Charts of Trade Weighted U.S. Dollar The dollar's movement has a significant impact on foreign demand for U.S. financial assets. When the outlook for the dollar is positive - meaning an expected increase in relative value versus other currencies - demand for U.S. financial assets and real estate tends to rise. Conversely, when the outlook calls for dollar weakness, foreign buyers often reduce their purchases of dollar - denominated assets. However, a declining dollar often coincides with Fed rate cuts which can boost corporate earnings - particularly among U.S. multinationals whose overseas sales are translated into higher dollar profits. The table shows stock market index performance during dollar bear markets over the past 40 years. Surprisingly, periods of dollar weakness have tended to coincide with strong stock market returns. Historically, a median 18% deline in the dollar over approximately 14 months has led to a 21% increase in the S&P 500, well above the index's average annual return. Table 1: Index Performance During Major U.S. Dollar Downtrends, 1985–2025 By sector, cyclical stocks have tended to the be the best performers during these periods of dollar decline. This likely due to Fed easing as well as the economically stimulating effect of more demand for U.S. exports since they are now less expensive for foreign buyers. As shown on the table below, Basic Material and Consumer Cyclical have had the largest gains during these periods. Of note, Technology has also been a strong sector. Table 2: U.S. Sector Performance During Major U.S. Dollar Downtrends, 1985–2025 Within the five leading sectors historically during periods of dollar weakness (Basic Material, Capital Equipment, Consumer Cyclical, Energy, and Technology), here are a handful of the industry groups within those sectors that are ranked within the top-third or so all groups currently. Table 3: Top U.S. Industry Groups Within Key Sectors Further, within these industry groups, several companies with relatively high international revenue exposure also show promising technical setups. Table 4: Watchlist of U.S. Stocks within Leading Industry Groups with High International Exposure In terms of international markets, as was shown in Table 1, the outperformance during dollar bear markets has been significant. We believe this may be due to several factors. First, as previously mentioned, often the Fed is easing thereby increasing demand for more speculative assets as well as stoking future economic demand. Next, weaker dollar reduces demand for U.S. dollar denominated assets. So, foreign investors will seek out non-dollar markets for investment. A weaker dollar also grants some reprieve particularly in emerging markets, by reducing local currency cost to service dollar-denominated debt. Finally, many foreign markets have higher commodities exposure versus the U.S. and stand to benefit as most commodities are priced in dollars. Image 7- USD Bear Market Performance of Global Baskets During the longest secular U.S. dollar bear market, here are how some key global currencies performed versus the dollar. Notably, gold was the top performer on the table below. Indeed, in this current period, gold and gold stocks have been very strong performers with the commodity up over 27% year to date as of intraday June 5. Next, historically when the dollar has been weak, there is demand for an alternative currency that has liquidity and is relatively stable. This has driven demand for the euro given it's supply and organized trading markets. On the other hand, the Mexican peso, which is closely tied to the U.S. economy and U.S. trade has been the worst performer among major currencies. Figure 4: Key Currency Performance During Last Secular Dollar Bear Market,2003–2008 Since the dollar peaked in early 2025, here is how the same currencies have reacted. Again, the euro has been one of the top performers. However, on this table only the Indian rupee has actually declined while the Mexican peso has risen +8%. Figure 5: Key Currency Performance, YTD 2025 A few favorable segments across international markets which could benefit from stronger local currencies, with markets that may be most sensitive in each category. Here are a few dozen names that have recently emerged out of periods of consolidation which fit well within the above context. Table 5: Watchlist of International Stocks Related to Groups Benefiting from Weak U.S. Dollar Kenley Scott, Director, Global Sector Strategist at William O'Neil + Company, made significant contributions to the data compilation, analysis, and writing for this article.
Yahoo
17-05-2025
- Business
- Yahoo
RLX Technology Inc (RLX) Q1 2025 Earnings Call Highlights: Strong Revenue Growth Amid ...
Net Revenue: RMB808 million, a 47% year-over-year increase. Gross Profit Margin: Improved to 28.6%, a 2.7 percentage point increase year over year and 1.6 percentage points quarter over quarter. Non-GAAP Operating Profit: RMB106 million, with a 9 percentage point increase in operating profit margin year over year. Operating Cash Inflow: RMB207 million, up from RMB4 million in the same quarter of the previous year. Cash Position: Total financial assets at RMB16.2 billion as of March 31, 2025, compared to RMB15.9 billion as of December 31, 2024. Inventory Turnover Days: 25 days. Receivable Turnover Days: 13 days. Payable Turnover Days: 81 days. Warning! GuruFocus has detected 2 Warning Signs with RLX. Release Date: May 16, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. RLX Technology Inc (NYSE:RLX) reported a 47% year-over-year increase in net revenues to RMB808 million for the first quarter of 2025. The company achieved a non-GAAP operating profit of RMB106 million, marking its sixth consecutive quarter of positive non-GAAP operating profit. Gross profit margin improved to 28.6%, a 2.7 percentage point increase year over year, driven by a favorable revenue mix and cost optimization. RLX Technology Inc (NYSE:RLX) has a strong cash position with total financial assets of RMB16.2 billion as of March 31, 2025. The company is well-positioned to adapt to regulatory changes with advanced in-house product development capabilities and a robust inventory management system. The global e-vapor industry is facing increased regulatory scrutiny, with bans on disposable e-vapor products in key markets like the UK and New Zealand. Despite the increase in e-liquid consumption, the lower average selling price of big puff products has stunted revenue growth across the industry. RLX Technology Inc (NYSE:RLX) anticipates negative growth in industry dollar value for 2025 due to the transitional shift to big puff products. The company faces operational challenges due to evolving regulations and trends, which require constant adaptation and innovation. In Mainland China, the dominance of illegal products limits growth opportunities for RLX Technology Inc (NYSE:RLX) despite regulatory enforcement improvements. Q: Could you share any latest updates on the progression of RLX's overseas expansion and plans to enter or consolidate new markets? Also, how do you assess the potential impact of evolving regulatory changes on your business? A: Sam Tsang, Head of Capital Markets, explained that RLX is maintaining a prudent approach to expanding into new markets due to evolving global macro and regulatory environments. They expect to take another one to two quarters to evaluate further market expansion. Regarding regulatory changes, RLX is adapting to stricter rules and clearer guidelines in Southeast Asia and environmental concerns in Europe and Oceania. Their strong in-house product development capabilities position them well to adapt to these changes. Q: What's the progress of Europe's transition from disposable e-cigarettes to big puff products, and how do you see future product trends? What strategies will you adopt to capture market share, and what are your competitive advantages in marketing and channel development? A: Sam Tsang noted that demand for big puff products is increasing in Europe, with a gradual shift from small puff disposables. The transition is expected to be largely completed by the end of the year. RLX's strategies focus on product development and channel strategy, optimizing their product portfolio and adopting a localized approach to distribution and retail. They are building local teams to enhance their route-to-market strategy. Q: How is the competitive landscape in Europe regarding category conversion, and what advantages does RLX have compared to global leaders like BAT or disposable brands like Air Bar? What about potential regulatory changes in the domestic market? A: Sam Tsang highlighted RLX's comprehensive product portfolio and agile supply chain as competitive advantages. Their commitment to the e-vapor segment and in-house R&D capabilities allow them to align with regulatory requirements and user needs. In Mainland China, the regulatory framework has remained stable, and RLX has launched compliant products, achieving modest revenue growth. Q: How does RLX plan to address the challenges posed by the evolving regulatory landscape, particularly in Southeast Asia and Europe? A: Sam Tsang stated that RLX is well-positioned to adapt to regulatory changes due to their strong in-house product development capabilities. They are focusing on compliance and innovation to meet market-specific needs and maintain a competitive edge. Q: What are RLX's strategies for product development and channel strategy to capture market share in different regions? A: Sam Tsang explained that RLX's strategies are highly customized to each market, focusing on product development and channel strategy. They track market trends and sales data to optimize their product portfolio and adopt a localized approach to distribution and retail, building local teams to enhance their route-to-market strategy. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error while retrieving data Sign in to access your portfolio Error while retrieving data
Bloomberg
15-05-2025
- Business
- Bloomberg
Smart Money Loses to Retail Crowd That Bet on Epic Stock Rebound
President Donald Trump's tariffs announcement on April 2 devastated financial assets, wiping out some $6 trillion in market value from US stocks in just two trading days. Wall Street's 'smart money' — hedge funds and other professional investors — dumped equities, and strategists urged clients to flee. But the so-called dumb money, embodied by retail traders, didn't see things that way. To them, the stock market was suddenly on sale, meaning it was time to buy, not hide. And it turns out they were right, as Trump reversed himself a week later and paused most of his levies on April 9, sending the S&P 500 Index soaring 18% since then.
