Goldman says a weak dollar could give stocks a $300 billion boost, benefiting these names the most

Published Mon, Jul 27 20208:25 AM EDT

(This story is for CNBC Pro subscribers only.) A weak greenback has historically prompted foreign investors to flock into U.S. stocks, according to Goldman Sachs. The bank said this time the group will purchase $300 billion this year on the back of a continuous dollar weakness and stocks with high international sales will benefit the most. The dollar will continue to weaken as the rest of the world recovers at a faster pace than the U.S. from the coronavirus crisis, Goldman predicts. The trade-weighted dollar will likely fall by 5% in the next 12 months following a 4% decline since mid-May, the bank said. "We expect foreign investors will buy $300 billion of US equities this year and replace corporations as the largest source of US equity demand," David Kostin, Goldman's head of U.S. equity strategy, said in a note. "Sectors with a high percentage of international sales typically outperform alongside a weakening USD." The U.S. Dollar Index (DXY) fell to 93.755 on Monday, its lowest level since July 2018. The index has fallen about 3.6% this month alone amid deteriorating U.S.-China relations and concerns about the U.S. economic recovery. During periods of dollar weakness, the international-facing information technology and energy sectors have performed the best while the more domestic-facing consumer discretionary sector has performed the worst, Goldman noted. The bank is recommending its international sales basket for investors betting on a weakening dollar. The basket consists of 50 S & P 500 stocks with the highest international sales exposure. Its median stock derives 70% sales from abroad. "The basket has historically outperformed a comparable basket of domestic-facing firms during periods of USD weakness," Kostin said. Semiconductor stocks in the information technology sector have a high representation in the portfolio. Lam Research , Nvidia, Maxim Integrated Products, Qualcom, Texas Intruments, Applied Materials , KLA and Broadcom all generate at least 80% of their revenue abroad. Consumer staples Philip Morris and Mondelez Innternational are also international oriented, which will fare well on the back of a weak dollar. Meanwhile, Electronic Arts and News Corp derive more than 60% of their sales overseas.

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(This story is for CNBC Pro subscribers only.)

A weak greenback has historically prompted foreign investors to flock into U.S. stocks, according to Goldman Sachs. The bank said this time the group will purchase $300 billion this year on the back of a continuous dollar weakness and stocks with high international sales will benefit the most.