To The Moon

A surging greenback eats into the international profits of companies like Apple (AAPL), Procter & Gamble (PG), McDonald’s (MCD) and Coca-Cola (KO), which all have significant exposure overseas.

But it may come as a surprise that smaller US companies, which tend to have a more domestic focus are affected too.

The S&P SmallCap 600 index has plunged 22% this year, only slightly less than the S&P 500’s 25% drop. And the Russell 2000, another index of mostly smaller companies, is down 25%, too.

The key words - less likely to be hurt, meaning they are not immune to a stronger USD dollar.

Also, the dollar is so strong — the US Dollar Index, which tracks the greenback against the euro, pound, yen and several other currencies has soared 18% this year — it’s making foreign imports cheaper. That is bad news for smaller US companies trying to compete with rivals from Europe and Asia.

The real danger will be with the continuous rise in interest rates and yet the dollar starts weakening, just like the pound. Not happening now, I am keeping watch on this closely. However, it is not all bad news…

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