With second-quarter earnings season coming up, could investors actually be overestimating the deleterious effects of a strong U.S. dollar?
A rising greenback is famously bad for companies that sell products overseas, given that it theoretically forces them to either raise prices abroad, or take home fewer dollars for each unit of foreign currency received.
In the first quarter, it weighed on the results of many global companies, and was even seen as decreasing U.S. GDP growth in the period. More recently, Oracle blamed the rising dollar for its disappointing earnings and revenue results.
But Boris Schlossberg, a currency and macro trader at BK Asset Management, says fretting over the dollar's potential impact on second-quarter earnings would be a mistake.
"Just as we underestimated the impact of a strong dollar in Q1, we're maybe overestimating it in Q2," Schlossberg said Thursday in a "Trading Nation" interview. "A lot of [multinationals] have made the adjustment from Q1 to Q2 to hedge some of their positions, and we haven't had the kind of [currency] volatility we had in Q1. So I do expect some impact, but not nearly the kind of impact we had in Q1 on earnings."
A case-in-point came in Thursday's earnings release from Nike. The company managed to expand revenue and earnings in the three months ended May 31 and beat estimates, despite a seriously negative currency impact that surpassed some analysts' expectations.