Dollar rescuing JPMorgan US stock as Goldman call fizzles

epa05101525 (FILE) A file photo dated 16 April 2009 showing a sign at a JPMorgan Chase building in New York, New York, USA. PMorgan Chase, the largest US bank by assets, released their 4th quarter results on 14 January 2016 saying their net income was 5.4 billion USD, an increase of 10 per cent. JPMorgan Chase said their net revenue was 23.7 billion USD, up one per cent, driven by higher revenue in corporate and consumer & community banking, largely offset by lower revenue in corporate and investment banking and asset management. EPA/JUSTIN LANE

Bloomberg

Two big firms, JPMorgan Chase & Co. and Goldman Sachs Group Inc., have two pretty divergent opinions about what you should own in the U.S. stock market right now. So far, the dollar is making the difference in who’s right.
Custom indexes maintained by both banks give the advantage to Dubravko Lakos-Bujas, the JPMorgan chief U.S. equity strategist who has been saying since December that companies that get most of their sales from abroad would do better than domestically oriented ones. Such multinational stocks are outperforming the broader market by almost 12 percentage points in the past three months.
Lakos-Bujas’s bull case foresaw just about everything that has gone right for the stocks: a weakening dollar, stabilization in China’s economy and a rebound in commodities. Bolstering all that is the Federal Reserve’s dovish stance, he said. “We continue to like multinationals as their earnings likely will surprise to the upside over the coming quarters.”
A JPMorgan basket of 30 stocks in the Standard & Poor’s 500 Index that derive more than 50 percent of revenue outside the U.S. has risen 23 percent since Jan. 20. The group, which includes Johnson & Johnson, Coca-Cola Co. and Chevron Corp., is on track for its third straight months of gains, the longest streak since mid-2014.
On the flip side, Goldman’s chief U.S. equity strategist, David Kostin, reiterated as recently as April 4 a May 2015 recommendation to buy the bank’s domestic-themed basket, while selling its international counterpart. It’s a bet that proffered a nearly 50 percent five-year return but is now fizzling out.
“A growing economy, rising rates and a stronger U.S. dollar benefit domestic-facing stocks,” Kostin wrote last month, adding that Goldman’s “interest rate and FX forecasts suggest the outperformance will persist.” The bank’s basket of 50 stocks in the S&P 500 most leveraged to domestic revenue has lagged behind its international counterpart by 8.6 percentage points since mid-January.

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