This earnings season has provided another reminder about the interconnectedness of U.S. companies and foreign markets. The below graphic from Factset (via the Wall Street Journal) shows the disparity between S&P 500 companies with more than 50% of sales outside the U.S. (green bars below) and companies with more than 50% of sales inside the U.S. (light Blue) or the S&P 500 overall (dark blue). S&P 500 firms with most of their sales outside the U.S. experienced an average earnings decline of 13.0%, while firms with most of their sales in the U.S. saw earnings advance 6%.
As you can see, investing in U.S. companies does not necessarily insulate your portfolio from global headwinds, such as the stronger dollar, slower growth in Europe or the “Trade Wars”. More than ever, companies are connected with foreign markets, both in terms of demand and their supply chains.
Source: Factset via Daily Shot (WSJ)